Two days ago, major energy companies Exxonmobil and Chevron reported their quarterly results for the second quarter of 2023, showing a steep decline in profits as oil and gas prices declined, with analysts estimating a second quarter profit of $2.04 per share for Exxonmobil, nearly 50% lower y/y, while total profits tumbled to just $7.8 billion.
Chevron isn’t expected to fare much better with the management telling investors this week it expects second quarter profits to be down 50% y/y, estimated at $ billion.
Lower oil and gas prices are only part of the story, as the companies staked their bets on petrochemicals to drive growths, however consumer demand stalled, while a wave of new factories came online recently, showing that margins for petrochemicals will face a long-term slowdown.
Growth Drive
Across the past decade, major oil companies relied on petrochemicals to drive growth in case gas and oil prices dropped, and a hedge for long-term profits when shifting to clean energy.
Last year, Intelligence Energy Group expected a sharp growth of 1.5 million bpd in oil demand in 2023, driven especially by China, with global demand on oil expected up to 101.2 million bpd.
It’s great news for oil market bulls, however such growth is expected to be mainly driven by petrochemicals rather than transportation fuel.
Indeed, many major oil and energy companies hedged a lot of their bets on petrochemicals to stave off the risks surrounding oil and gas, with S&P Global estimating that 49.5 million tons of ethelene will cone online between 2020 and 2040.
New Energy
However, not all eggs were put into one basket, with major energy companies investing heavily in clean energy initiatives, including renewables, and carbon capture to reuse and stock it.
Carbon capture is a promising technology that could be used to reduce climate footprint for industries heavily reliant on fossils such as air travel and hydrogen production.
Last February, The Linde company announced plans to build a new facility that could cost $1.8 billion, to capture carbon in order to provide and develop clean hydrogen and nitrogen for use in various applications.