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Five weeks after the start of the war between the US, Israel and Iran, as Americans face rising fuel prices and the threat of higher inflation, it is becoming increasingly clear who is making “a lot of money” in the conflict.<\/p>\n
As the White House faces criticism that the war will drive up fuel prices, Donald Trump has assured Americans in Social Truth that the US, as the world’s largest oil producer, will are really benefiting, with profits being recorded exclusively by defense contractors and oil companies, reports The Guardian.<\/p>\n
The US Defense Department announced on Wednesday that Boeing will join Lockheed Martin in an effort to triple US production of missile tracking systems, which immediately boosted the space equipment maker’s share price.<\/p>\n
Lockheed Martin, a key defense partner for the US government, has seen its share price its up 25% since the start of the year.<\/p>\n
At the same time, the value of US oil has risen sharply as Iran continues to block the Strait of Hormuz, through which a fifth of the world’s oil and gas passes, and energy infrastructure in the Middle East remains vulnerable to attack.<\/p>\n
The price of US crude oil has nearly doubled since the start of the conflict, jumping from $65 to more than $110 per barrel in a month.<\/p>\n
Gasoline prices at the pump have followed suit, surpassing $4 a gallon for the first time since 2022.<\/p>\n
Oil giants make windfall<\/p>\n
The price increase has been extremely favorable for US oil companies, whose stocks have risen sharply since the start of the year. While the overall U.S. stock market has fallen, shares of companies such as ExxonMobil, Shell and Chevron have jumped more than 20%.<\/p>\n
According to a report from market research firm Rystad Energy, U.S. oil producers could earn an additional $63 billion in profits as oil prices surpass $100 a barrel.<\/p>\n
\u201cOil prices in March were significantly higher than expected, so that was certainly a win. unexpected for the vast majority of US energy companies at this point,\u201d said Leo Mariani, senior analyst at Roth Capital Partners.<\/p>\n
The last time oil companies benefited from a price shock was in 2022, after Russia, a major oil producer, invaded Ukraine, causing uncertainty in energy markets. Average US fuel prices then hit a record $5 a gallon, while inflation hit a generational high of 9%.<\/p>\n
While it was a painful time for Americans, for a select few it was an opportunity for big profits. Publicly traded oil and gas companies around the world made $916 billion in profits that year, more than triple the amount they had in previous years.<\/p>\n
U.S. companies alone made $281 billion in bullish months. In 2023, Chevron announced a massive share buyback program of $75 billion, seven times more than a year earlier, after the company’s shares rose more than 50% in 2022.<\/p>\n
\u201cThe cost of production did not increase, it was no longer difficult to get oil to market, but suddenly the price was twice as high,\u201d said Gregor Semieniuk, an assistant professor of public policy and economics at the University of Massachusetts at Amherst. “When the price is $50 a barrel, shale companies are barely making a profit. But when the price is $100, the profit margin increases many times over.”<\/p>\n
In a study published in September, Semieniuk and economist Isabella Weber found that 50 percent of the profits made by US oil companies in 2022 went to the richest 1 percent of Americans. About 1 percent of the gains went to Americans in the bottom 50 percent of the wealth distribution.<\/p>\n
Economists say the gains from the current price shocks could be even larger. Unlike 2022, the conflict with Iran has damaged the oil infrastructure in the Middle East. While US oil companies have investments in the region, “many of the bigger companies are very, very well diversified globally,” Mariani said.<\/p>\n
“You gain a lot more from higher prices than you lose from lost production,” he added. Even if the conflict ends, it is unclear how long it will take the Middle East to restore oil production to pre-war levels.<\/p>\n
\u201cRussian oil in 2022 was never taken off the market, it was just reallocated,\u201d said Clay Seagle, senior fellow in the Energy and Climate Change Program at the Center for Strategic and International Studies. “We’re now facing a much more severe supply disruption because oil has really been taken out of the market.” “If this continues, it will exceed those levels”.<\/p>\n
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