The five major giants raked in a staggering $48 billion in the second quarter, attracting envy! Trump criticizes them for "making too much," and the shadow of windfall taxes reemerges for the oil industry.

It has been noted that major oil companies experienced explosive profits in the second quarter. A key question today is whether the industry will use this unexpected windfall to reward shareholders, strengthen balance sheets, or invest for the futurewhile also striving to avoid escalating political backlash. Thanks to rising fossil fuel prices driven by the hostile relations between the U.S. and Iran, the five major oil giantsExxon Mobil Corporation (XOM.US), Chevron Corporation (CVX.US), BP p.l.c. Sponsored ADR (BP.US), Shell (SHEL.US), and Total (TTE.US)generated up to $48 billion in profits from April to June. During the same period, their cash generation reached nearly $90 billion, setting a historical recordsurpassing even the levels seen after the Russia-Ukraine conflict erupted in early 2022. This substantial profit has drawn the ire of environmental activists, who are once again calling for a windfall tax on the industry; it has also sparked dissatisfaction from U.S. President Trump. Last week, President Trump criticized American oil giants Exxon Mobil Corporation and Chevron Corporation, accusing them of "making too much money" during the Iranian conflict due to rising oil prices, and once again called for lower gas prices at the pump. Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), stated, "The five giants enjoyed an unprecedented windfall of cash in the last quarter." However, Williams-Derry pointed out that they have not used this cash for "drill baby drill"referring to Trump's policy of maximizing energy production. For instance, he noted that the capital expenditures, dividends, and stock buybacks of major oil companies remained stable. "This raises the question: If they are not giving shareholders more money, what have these oil giants done with this windfall cash?" Where did the money go? According to Williams-Derry from IEEFA, oil companies have largely been seeking to build cash reserves and pay down debt to improve their balance sheets. In fact, the cash reserves of the five global giants grew by over $17 billion quarter-over-quarter. Williams-Derry said, "A cynical way to describe the financial playbook of the oil industry is 'pray for war.' These oil giants need periodic price spikeslike those from the Ukraine and Iranian crisesjust to solidify their financial conditions." "For the oil giants, the extreme pain felt by consumers and the global fuel shortage serve as a financial antidote against long-term sluggishness and stable oil prices, as prolonged low oil prices erode their financial health. From the perspective of oil giants, price spikes are a normal function rather than a systemic flaw," he added. The management of the oil and gas giants told the media that during the conflicts in the Middle East, they were working to double down on areas of their operations that they can control, such as operational performance, trading, and optimization. BP p.l.c. Sponsored ADR CEO Maggie O'Neill stated in an interview on August 4, "What BP is doing is ensuring that we focus on things we can strive to help address the current situation. We are significantly enhancing our reliability, whether in our upstream assets that produce crude oil or in our refining assets." O'Neill noted that the company has adjusted its refinery operations to maximize the supply of the products that consumers need most at any given time, citing aviation fuel and diesel as examples. Meanwhile, Shell CEO Wael Sawan described the volatility as the "new normal" and stated that the macro environment has provided very strong tailwinds for commodity prices. "Potentially unsustainable profit and cash flow explosion" AJ Bell's investment director Ross Mold indicated that the oil and gas giants have demonstrated their plans for how to utilize these substantial profits and cash flows. Mold noted, "The full suite of options includes mergers and acquisitions, maintenance capital expenditures, investments in new projects (renewable energy or hydrocarbons), debt reduction, and ultimately dividends and stock buybacks." Mold stated that the specifics and degree of these options vary by company; for instance, BP is in "debt reduction mode," while Shell has adopted a more expansionist stance with an acquisition in Canada. "However, it is clear that given the overall capital expenditures budget remains under strict control, the hydrocarbon giants are taking a cautious attitude toward investing in new oil and gas fields," Mold said. "This may be because people feel that the current profit and cash flow explosion may not be sustainable, particularly if the U.S. and Iran reach a lasting peace agreement, or due to concerns over new taxes, or in facing continued public, political, and advocacy group pressure regarding environmental issues," he added. API: Windfall tax "will not lower consumer prices" In addition to Trump's criticism, there has been ongoing political pressure regarding the war-time profits of the oil and gas industry in recent weeks. Advocates are calling for decision-makers to levy higher taxes on energy giants to help fund climate-resilient infrastructure, such as fire and flood protection systems. The Portuguese government announced last week that it had approved a windfall tax on the extraordinary profits of oil and refining companies in 2026. The industry pressure group representing around 600 drilling companies, refineries, and other stakeholdersthe American Petroleum Institute (API)described the oil and gas industry as a cyclical one that should be measured in decades rather than quarters, warning against imposing windfall taxes on excess profits. An API spokesperson stated, "During one of the most severe global energy upheavals in decades, the U.S. oil and gas industry is delivering record production and the world's leading refining capacity while continuing to invest in supplies, infrastructure, and resilience that strengthen Americas long-term energy security." As for the windfall tax, the API stated that greater energy security cannot be achieved through taxation. "Windfall taxes do not lower consumer pricesrather, they can undermine the long-term investments needed to strengthen supply, infrastructure, and a more resilient energy system," the organization added.