The world’s largest oil company, Saudi Aramco, recently reported a whopping $31.88 billion in profits for the first quarter of this year. This staggering figure is more than the combined profits of tech giants like Google, Amazon, and Tesla, and highlights the immense financial power of the oil industry.
Despite a 19% YoY drop in profits, Saudi Aramco, which is the third-largest company in the world after Apple and Microsoft, still managed to rake in billions of dollars. In 2020, the company posted record profits of $161 billion, the highest of any publicly listed company.
Saudi Aramco is majority-owned by the Saudi Arabian government, with 90% of the stock under their control. The company’s dividend payment helps finance the state, and they are now introducing an additional dividend that could potentially boost payouts for the Saudi government by billions of dollars.
The new dividend will be “in the amount of 50%-70%” of Saudi Aramco’s annual free cash flow, which was $30.9 billion this quarter, and nearly $150 billion last year. This means that the company’s profits are not just benefiting themselves, but also helping to fund the Saudi Arabian government.
For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance. This staggering figure highlights the enormous influence of the oil industry and the immense profits that can be made from it.
Despite the ongoing push towards renewable energy sources, oil and fossil fuels will continue to play a significant role in the global energy mix. The Middle East already has a key advantage in this transition, given their significant oil reserves. However, the underinvestment in mining over the years could easily see oil prices rise again, further boosting the profits of oil companies like Saudi Aramco.
This immense profitability has led many to view the oil industry as a “money printing machine,” capable of generating enormous wealth and power. However, it’s important to note that this profitability comes at a significant cost to the environment and to human health.
The burning of fossil fuels is the largest contributor to greenhouse gas emissions, which are responsible for climate change and its devastating impacts. The extraction of oil also poses significant risks to the environment, from oil spills to habitat destruction.
As we continue to push towards a more sustainable future, it’s essential to recognize the enormous power and influence of the oil industry and to work towards reducing our reliance on fossil fuels. This will require significant investment in renewable energy sources and a transition away from oil and gas as primary energy sources.
Saudi Aramco’s recent profits highlight the enormous financial power of the oil industry. Despite ongoing efforts to transition towards renewable energy sources, oil and fossil fuels will continue to play a significant role in the global energy mix for years to come. While this profitability is undoubtedly significant, it comes at a significant cost to the environment and human health, making it imperative that we work towards reducing our reliance on fossil fuels and transitioning to more sustainable energy sources.