The war on Iran likely brings a new oil price shock and windfall profits.
So, who stands to win?
Our research shows: Last time around (2022), the US reaped the largest fossil fuel profits of any country ($377bn). 50% went to the top 1%, only 1% to the bottom 50%. A🧵
Method: We calculated net income from the world's 1,437 listed oil & gas firms, adding all 22,759 US privately held firms. We then assigned these profits via financial system intermediaries to the firms’ ultimate beneficiaries, creating a network of 252,433 nodes.
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Oil & gas profits were much higher in '22 than in previous years: $916 billion for listed firms globally. A huge windfall for shareholders: U.S. beneficiaries held claims to $301bn—1/3 of the listed total. For comparison: total '22 U.S. low-carbon energy investment was $266 bn.3/
The stock market consequences could not have been starker: The MSCI World Energy Index (ExxonMobil, Chevron, Shell etc) doubled in 2021-2022, while the Global Alternative Energy index (Vestas, First Solar, Orsted etc.) fell by half in 2021-2024. 4/
The distribution of profits worsens existing inequalities: 50% of US profit claims are held by the top 1% of wealth owners, and 84% by the top 10%. The bottom half (66 million households) get 1% of the profits, the top 0.1%—a mere 131 thousand households—get 25x more. 5/
Record fossil fuel profits reinforce existing racial & ethnic inequalities. Whites (64% of households) benefit disproportionately with claims on 87% of all profits. Blacks (14% of hholds) have a claim on only 3%, & Hispanics (10% of hholds) a mere 1%, mainly through pensions. 6/
Fossil fuel profits sharply increase inflation inequality. The 2022 increase in fossil fuel profits compensate several percent of 2022 inflation for the richest (triangles and squares), dwarfing differences in inflation due to differing consumption baskets (disks). 7/
Excess profit taxes could contain fossil fuel profits (and perhaps the backing for war?). Revenues could finance investments or alleviate inflation impacts: taxing incremental 2022 US profits as excess could've doubled clean energy investments or paid each US household $1,715. 8/
A closer look at our method: We start with global profits, which we then trace to US shareholders. To do this, we used all the data we could get. They’re listed in the first column here, together with what we used them for. 9/
We propagate profits from oil and gas firm to
-direct ultimate beneficiaries (holding shares in their own names) and fund managers (holding shares on behalf of others);
-ultimate beneficiaries, e.g. pension funds or business owners;
-socioeconomic distributions 10/
This results in this central Sankey plot that shows the flow of 2022 fossil fuel profits ‘from the well’ to their ultimate U.S. beneficiaries. 11/
Link to published article: sciencedirect.com/science/articl…
Hybrid presentation of this research by @GregorSemieniuk @LSEnews on March 3: lse.ac.uk/european-insti… END
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