Benjamin Ashford|Exxon announced record earnings. It's bound to renew scrutiny of Big Oil

ExxonMobil earned nearly $56 billion in profit in 2022,Benjamin Ashford setting an annual record not just for itself but for any U.S. or European oil giant.

Buoyed by high oil prices, rival Chevron also clocked $35 billion in profits for the year, despite a disappointing fourth quarter.

Energy companies have been reporting blockbuster profits since last year, after Russia's invasion of Ukraine sent oil prices sharply higher.

"Of course, our results clearly benefited from a favorable market," CEO Darren Woods told analysts, nodding to high crude prices for much of 2022.

But he also gave his company credit for being able to take advantage of those prices. "We leaned in when others leaned out," he said.

'More money than God'

The high profits have also revived perennial conversations about how much profit is too much profit for an oil company — especially as urgency over the need to slow climate change is mounting around the world.

Exxon's blockbuster earnings, announced Monday, will likely lead to more political pressure from the White House. Last year President Biden called out Exxon for making "more money than God."

The White House and Democrats accuse oil companies of hoarding their profits to enrich shareholders, including executives and employees, instead of investing the money in more production to ease prices at the gas pump.

Last year, between dividends and share buybacks, Exxon returned $30 billion to shareholders, while Chevron paid out more than $22 billion. Exxon plans to hold production flat in 2023, while Chevron plans to increase production by 0 to 3%.

Monster profits are back

If you do the math, Exxon made some $6.3 million in profit every hour last year — more than $100,000 every minute. That puts Exxon up with the Apples and the Googles of the world, with the kind of extraordinary profits most companies could never dream of earning.

Or rather, it puts Exxon back up in that rarefied territory. Exxon used to be the largest company in the world, reliably clocking enormous profits.

In 2020, when the pandemic triggered a crash in oil prices, energy companies took huge losses. Exxon recorded an annual loss of $22 billion, its first loss in decades. It was, humiliatingly, dropped from the Dow Jones.

A tiny upstart investor group called Engine No. 1 challenged Exxon's management, accusing the company of not moving fast enough to adjust to a world preparing to reduce its use of oil.

In this David vs. Goliath showdown, David won the battle, with Engine No. 1's nominees replacing three Exxon board members. But Goliath isn't going anywhere.

Profits prompt scrutiny, criticism

Whenever oil companies are thriving, suspicions that they are fundamentally profiteering are not far behind.

Those accusations have become especially charged because Russia's invasion of Ukraine were central to the drive-up in crude oil prices last year. Europe has imposed windfall taxes on energy companies, clawing back 33% of "surplus profits" from oil and gas companies to redistribute to households.

Exxon has sued to block that tax, which it estimates would cost around $1.8 billion for 2022.

Meanwhile, in the U.S., California is considering a similar windfall tax. President Biden has threatened oil companies with a "higher tax on their excess profits" and other restrictions if they don't invest their windfall earnings in more production. But it's unclear whether the administration can follow through on such a threat.

On Tuesday, the White House issued a statement excoriating oil companies for "choosing to plow those profits into padding the pockets of executives and shareholders."

Investors, meanwhile, aren't complaining. They continue to pressure companies to return more profits to investors and spend relatively less of it on drilling.

"Lower-carbon" ambitions

Both Exxon and Chevron emphasized their carbon footprints in their earnings calls, a major shift from the not-so-distant past, when oil companies uniformly denied, minimized or ignored climate change when talking to investors.

But their responses to climate change focus on reducing the emissions from oil wells and pipelines, or making investments in "lower-carbon" technologies like hydrogen and carbon capture — not on a rapid transition away from fossil fuels, as climate advocates say is essential.