The oil and gas industry has delivered $2.8bn (£2.3bn) a day in pure profit for the last 50 years, a new analysis has revealed.
The vast total captured by petrostates and fossil fuel companies since 1970 is $52tn, providing the power to “buy every politician, every system” and delay action on the climate crisis, says Prof Aviel Verbruggen, the author of the analysis. The huge profits were inflated by cartels of countries artificially restricting supply.
The analysis, based on World Bank data, assesses the “rent” secured by global oil and gas sales, which is the economic term for the unearned profit produced after the total cost of production has been deducted.
The study has yet to be published in an academic journal but three experts at University College London, the London School of Economics and the thinktank Carbon Tracker confirmed the analysis as accurate, with one calling the total a “staggering number”. It appears to be the first long-term assessment of the sector’s total profits, with oil rents providing 86% of the total.
Oil rents. That’s what governments have gained from it all.
Royalties, taxes. 86% of it.
Hmm, I might have slightly over done that. Here’s the definition of rent being used:
Indicator Name Oil rents (% of GDP)
Long definition Oil rents are the difference between the value of crude oil production at regional prices and total costs of production.
Source World Bank staff estimates based on sources and methods described in the World Bank’s The Changing Wealth of Nations.
Topic Environment: Natural resources contribution to GDP
Aggregation method Weighted average
Statistical concept and methodology The estimates of natural resources rents are calculated as the difference between the price of a commodity and the average cost of producing it. This is done by estimating the price of units of specific commodities and subtracting estimates of average unit costs of extraction or harvesting costs. These unit rents are then multiplied by the physical quantities countries extract or harvest to determine the rents for each commodity as a share of gross domestic product (GDP).
Development relevance Accounting for the contribution of natural resources to economic output is important in building an analytical framework for sustainable development. In some countries earnings from natural resources, especially from fossil fuels and minerals, account for a sizable share of GDP, and much of these earnings come in the form of economic rents – revenues above the cost of extracting the resources. Natural resources give rise to economic rents because they are not produced. For produced goods and services competitive forces expand supply until economic profits are driven to zero, but natural resources in fixed supply often command returns well in excess of their cost of production. Rents from nonrenewable resources – fossil fuels and minerals – as well as rents from overharvesting of forests indicate the liquidation of a country’s capital stock. When countries use such rents to support current consumption rather than to invest in new capital to replace what is being used up, they are, in effect, borrowing against their future.
So we do not in fact know the split between government and oil company. In Saudi it’s 100% the government. Here that 86% is likely the govt – we’ve had oil royalty rises which reduced output so we’re close to the peak – at least – of taxing all rents. Elsewhere, well, hmm.
But it’s not going to be long before someone starts insisting we should tax the oil companies $50 trillion and change, is it?