“The liquid gold rush could be Trump’s undoing… he’s going to face the contradiction between the profit motive of US oil and gas giants and the expectations of millions of voters that he will make America great for them with lower energy and other prices.”
By Steve Howell
Have you heard the news? Nearly all of the record $439 billion in profits US companies made from oil and gas in the 2022 boom year went to the wealthiest 10% of Americans. They had an 84% share of it. The bottom 50% got only 1%.
You might expect such notable new data to be considered newsworthy after a presidential election in which energy prices were a hot issue. But my online searches suggest that not a single major US media outlet has reported the findings of this research, which was published shortly after the election by the Political Economy Research Institute (PERI) at the University of Massachusetts Amehurst.
The PERI economists have painstakingly followed the money to find out whose pockets the record 2022 global fossil fuel profits ended up in. As their research paper explains, they merged “profit data with ownership information for oil and gas companies” and this allowed them to identify “claims on profits through the shareholding network via intermediaries, such as financial institutions and asset managers, all the way to individual beneficiaries”.
Of the total global bonanza, they found the US was the biggest beneficiary and estimated that the $439 billion of profits US owners had accumulated were distributed as below:
This vastly unequal distribution of the benefits of these record profits – with 90% of the population getting only 16% – reflects the staggering levels of inequality in the ownership of assets and has the effect of increasing it. For the great majority, it’s a double whammy: high energy prices hit harder the lower your income, while the benefits of the profits they generate are lower or non-existent.
It’s often claimed that high profits and dividend payouts are good because they finance pensions. But the PERI study shows this to be vastly exaggerated: it found that only 18% of the US’s fossil fuel profits in 2022 went to assets owned by pension funds, the benefits of which tend to be weighted towards middle and higher earners anyway. Not surprisingly, the study also found that minority ethnic groups got the worst deal. While 14% of US households are black, they had a claim on only 3% of the profits. Similarly, Hispanics – 10% of households – had a claim on a mere 1%. The study calculated that each and every household would have received $2,094 “if the excess profits in 2022 over those in 2021 had instead been distributed as equal ‘dividends’ to all households.”
During the midterm elections in 2022, President Biden accused the oil majors of profiting from the Ukraine war and raised the possibility of a windfall tax, but – as with so many things – the campaign rhetoric did not translate into action.
The PERI study confines itself to 2022 but, while that year stands out as a particularly lucrative one, it seems to have established a new normal for US oil and gas. I have had a look at the financial reports of the two biggest companies: their profits in 2023 and the first three quarters of 2024 have remained well above pre-COVID/Ukraine war levels, even though oil prices have dropped from the heady heights of 2022 to levels only marginally above those of 2018-19.
A big factor in the ongoing boom in US oil and gas profits is increased European dependency on US imports as a result of sanctions against Russia. In 2023, the US overtook Qatar as the world’s largest exporter of Liquified Natural Gas (LNG) mainly because US LNG exports to Europe more than trebled to around 55 million tons annually in 2022 and 2023. They dropped 22% in the first nine months of 2024 as European power generators increased output from renewables, but they are still well above the pre-sanctions level.
With Donald Trump moving into the White House, this is set to become a trade battleground. In December, Trump said on Truth Social that he had told the EU that “they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!”
The problem for Trump is that increasing LNG exports to Europe could push up prices for US domestic consumers as fossil fuel companies exploit the boom in demand. This was alluded to in a US Energy Department report published in December, which said:
“There is uncertainty in how rising export levels will affect the domestic market. While there has not been a consistent relationship between domestic prices and export levels to date, that could change as a larger percentage of U.S. natural gas is exported.”
In the presidential election, Kamala Harris failed miserably to address voter concerns about the cost of living. She initially said she would introduce “price-gouging laws” but she did not mention this in the debates with Trump after coming under pressure from Wall Street and allied economists to drop the idea.
One of the economists involved in producing the PERI report, Isabella Weber, argues that Trump won the election on the economy because, while many voters felt that the Democrats had abandoned them on “pocketbook struggles”, he promised to bring down the price of energy and other essentials. Discussing the election in the current issue of The Nation, she writes:
“He did not say how he would do this, but he portrayed himself as a leader who would protect people against rising costs. Of course, if implemented, the tariffs that he’s proposed would create a massive cost shock, but on the campaign trail, he framed them as measures to protect ordinary Americans.”
On election night, Trump publicly told Robert Kennedy Jnr – who was once considered an environmentalist – that he could have a job in his administration as long as he stayed away from the “liquid gold” of fossil fuels. In the coming months, the liquid gold rush could be Trump’s undoing. As reality kicks in, he’s going to face the contradiction between the profit motive of US oil and gas giants and the expectations of millions of voters that he will make America great for them with lower energy and other prices.
Trump’s working class supporters may at the moment be putting their faith in him. Many no doubt believe that booming profits will somehow trickle down into their pockets. But, as the PERI study shows, precious little will. Its findings provide valuable ammunition as US progressives begin the fightback.
- Steve Howell is a journalist, author and former political adviser to Jeremy Corbyn. You can follow him on Twitter/X and subscribe to The Rest is Bullshit for regular updates and analysis from Steve.
- This article was originally published by The Rest is Bullshit on 4 January 2025.
