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Returns vs. drilling Trade-off for US oil producers as a windfall tax looms

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Profiting from sky-high oil prices, US oil corporations are handing out billions to shareholders and growing cash reserves, a practice that irritates lawmakers and voters grappling with record fuel prices while pleasing Wall Street.

Fuel price increases have pushed inflation to a 40-year high, with U.S. gasoline forecast to rise by more than a dollar to $6 per gallon by August.

Some politicians argue that the industry’s focus on profits benefits a select few at the expense of customers.

According to Reuters’ estimates of potential output if half of existing investor payouts flowed to new oil and gas drilling, the market has been deprived of nearly half a million barrels of new oil daily due to the tradeoff between rising payouts for just a single quarter and more spending on production.

According to consultancy BTU Analytics, a FactSet Company, earnings from big U.S. shale, which accounts for two-thirds of U.S. oil output, might reach $90 billion this year, up from $37 billion in 2021. Only 32 publicly traded oil and gas companies are included in the estimation.

Windfall levies are being proposed in Washington, which might eat into energy revenues. A bipartisan group of more than 30 lawmakers recently called for a vote in Congress on a new oil tax.

U.S. President Joe Biden attacked oil companies on Friday, saying they are purposefully delaying drilling to boost oil and stock prices.


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