The Aramcomeback Kid

Image source: Maksim Safaniuk - Shutterstock

What's going on?

After a tough year or two, oil producers are rolling in it again – and the world’s largest, Saudi Aramco, became the latest to report much-improved profit over the weekend.

What does this mean?

As major economies reopen, commodity prices have surged: oil is up more than 30% so far this year. That’s provided a welcome windfall for energy companies after the price of the slippery elixir tanked in early 2020 – and Saudi Arabia’s state-owned oil giant, which listed some shares publicly in late 2019, is the latest to join the party.

Aramco’s earnings last quarter were actually even better than expected, almost quadrupling compared to the same time last year. But while many oil majors have taken this opportunity to raise dividends and reintroduce share buybacks, Aramco plans to reinvest its bumper profits in expanding oil production further – even as other energy firms scale back their own output (tweet this).

Why should I care?

The bigger picture: In through the out door.
Aramco’s European and American rivals are under pressure from governments and investors alike to cut oil production and accelerate their shift toward renewable energy. And that mission became even more urgent on Monday after a landmark United Nations report flashed code red for climate change absent drastic action. Saudi Aramco, however, appears to anticipate oil remaining a part of the world’s energy mix for some time to come.

Zooming in: Wrong way down a one-way street?
Road transport is one of the largest sources of greenhouse gas emissions – but according to Bloomberg New Energy Finance, at least two thirds of global car sales will be electric by 2040. The research firm reckons that oil demand from fossil fuel road vehicles will peak in 2027 and rapidly decline thereafter – which may mean Aramco’s present plans to increase production end up misplaced.

Originally posted as part of the Finimize daily email.

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