Energy giants’ earnings bonanza could be last hurrah

Today’s top stories

• The UK’s Competition and Markets Authority dealt a blow to Microsoft’s attempted $75bn acquisition of video game company Activision Blizzard, warning of “higher prices, fewer choices, or less innovation for UK gamers”. A deal would make Microsoft the third-largest gaming company behind China’s Tencent and Japan’s Sony. Activision said blocking a deal could cost a “fragile” government a post-Brexit opportunity with thousands of jobs.

• The death toll from the devastating earthquake in Turkey and Syria rose above 11,000 as the Turkish government struggled to get aid to victims. Turkish stock market trading has been suspended.

• The UK is looking at sending fighter jets to Ukraine after a plea from President Volodymyr Zelenskyy as he addressed parliament in Westminster ahead of an expected appearance at a summit in Brussels.

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Good evening.

France’s Total and Norway’s Equinor today became the latest energy giants to report record earnings from the surge in prices caused by the war in Ukraine. But signs are growing this could be something of a last hurrah.

Total announced an increase in its dividend, more share buybacks and a doubling of profits to a record $20.5bn. Equinor reported $74.9bn in adjusted pre-tax earnings as it replaced Russia as Europe’s largest supplier of natural gas. BP joined in the earnings bonanza yesterday, reporting a doubling of profits to a record $28bn.

Although BP said it was scaling back its ambitious commitment to cut fossil fuel production by 40 per cent by 2030, global moves towards more sustainable sources of energy could be accelerating again after stalling during the energy crisis.

We report today on the waning demand in the US for petrol — which accounts for about 9 per cent of global oil use — from the combination of more efficient cars, the take-up of electric vehicles and a fall in commuting from increased working from home.

The US Energy Information Administration forecasts that usage will continue to decline in 2023 and 2024 after falling 6 per cent last year compared with pre-pandemic levels. “The consensus is we are not going to get back to pre-Covid levels of consumption,” said one industry expert. “That matters because US gasoline is the world’s largest single market for an oil product. It dwarfs any other national gasoline market in the world.”

Separately today the International Energy Agency said 2025 could be a “tipping point” for the power sector on carbon dioxide emissions as cleaner sources of electricity generation come online. The burning of fossil fuels from electricity generation is one of the most significant contributors to the greenhouse gases causing climate change.

The renewables sector meanwhile is set for a huge boost from the $369bn in green energy subsidies on offer in the US Inflation Reduction Act. EU leaders meet tomorrow to discuss their own plans for incentives after Brussels said last week that €250bn was “immediately available”.

Not everyone is convinced that fossil fuels are on the verge of extinction. The FT’s Lex column says the jump in BP’s share price after its results suggests investors believe the energy transition will take longer than some expect, with scope for increased oil and gas output.

Read our new special report Innovation in Energy for examples of how new technologies — ranging from wireless vehicle charging pads to domestic heat pumps and older solutions, such as sail-power — are helping to limit the impact of climate change.

Need to know: UK and Europe economy

UK prime minister Rishi Sunak is breaking up the government’s business department to try and boost his plan for growth, and creating three new ministries to emphasise energy security and efforts to turn Britain into a “science superpower”.

New data showed more than £4.4bn of taxpayers’ money has been paid out to British banks to cover default and fraud of £77bn in state-guaranteed loans made to struggling businesses during coronavirus lockdowns. Further significant losses are also likely.

The European Central Bank put more pressure on eurozone banks to cut their exposures to Russia, even as Moscow becomes more hostile to corporate departures. More evidence is emerging of the hit to Russia from lost oil and gas revenues.

Need to know: Global economy

President Joe Biden used his State of the Union address to warn China over threats to US sovereignty as well as defending his domestic economic record. The FT editorial board called for restraint after tensions with Beijing increased following the shooting down of a Chinese hot air balloon.

US Federal Reserve chair Jay Powell warned that interest rates might have to rise more than investors expected because it will probably take a “significant period of time” to curb inflation given stronger labour market data.

Chief economics commentator Martin Wolf uses lessons from the 1970s to warn of the dangers of monetary policy being loosened not just too soon, but too far. “Whatever happens, do not repeat what happened in the 1970s: get inflation down and then keep it down,” he concludes.

Our Big Read examines how Russia has skilfully bought a new sphere of influence in Africa on the cheap, utilising a “cut-price strategy that mixes propaganda, arms sales, mining activity and mercenaries”. 

Nigeria’s top court has halted a botched plan to replace large denomination banknotes that has caused chaos in the country’s economy just ahead of a general election.

Tankers in Iran’s “ghost fleet” — vessels that disguise their ownership and movements to get round sanctions — have switched to Russian oil, according to FT research.

Need to know: business

Danish shipping group Maersk warned of a plunge in profits as the two-year boom in container shipping grinds to a halt. It expects global demand this year to be between minus 2.5 per cent and plus 0.5 per cent.

Carlsberg, the world’s third-largest brewer, said it wanted to insert a buyback clause when selling its Russian business that could offer it a return if the political situation changed. It also warned of a hit to beer sales as it raised prices to offset higher costs.

Dulux paint owner Akzo Nobel is slashing jobs and production in Europe in the face of falling demand. European manufacturing has been hit particularly hard by cuts to Russian gas supplies following the invasion of Ukraine.

European manufacturers of nitrogen fertiliser have also been hit hard by the war in Ukraine as the price of their natural gas feedstock soared. However, Morocco’s OCP Group, the world’s largest phosphate fertiliser company, has reported record earnings: the company has exclusive access to the 70 per cent of global phosphate reserves located in the country.

US gamblers are set to wager a record $16bn on Sunday’s Super Bowl. The game, which typically enjoys a TV audience of more than 100mn people, should provide a major boost for online operators such as FanDuel and DraftKings.

The World of Work

As water-cooler catch-ups gradually replace pandemic-era virtual relationships, our Working It podcast tackles the question: why are friendships at work so important?

MBA 101 is a new email series from our business education team that aims to guide you through the step-by-step process of applying for your MBA, with top tips from inside admission offices. Register here ahead of the first instalment on February 14.

Some good news

The Royal Zoological Society of Scotland has shared the first pictures of two koala joeys born at Edinburgh Zoo after emerging from the pouch where they spent their first few months.