Performing a 180 from the catastrophe of the pandemic when crude prices briefly went negative, oil giants Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) both posted record profits in the second quarter of this year. Not surprisingly, CVX stock shot higher, gaining more than 8% as it moved toward the afternoon session. However, Washington will likely zero in on big oil as American households struggle with soaring inflation.
Down to the numbers, Chevron in particular reported earnings of $11.62 billion in Q2, up a staggering 277% from the year-ago quarter’s tally of $3.08 billion. On the revenue front, the company posted sales of $68.76 billion, almost double the $37.6 billion posted in Q2 2021.
As well, bolstering sentiment for CVX stock is that its results beat Wall Street estimates. On an earnings per share basis, analysts expected Chevron to deliver $5.10 per share excluding certain items. Instead, actual EPS was $5.82. On the top line, experts projected a tally of $59.29 billion, whereas Chevron managed to pull a positive surprise and beat expectations by nearly 16%.
Still, as CNBC reported, big oil’s big quarter “is likely to draw further ire from Washington. President Joe Biden has called on companies to raise output, saying they’re keeping prices elevated at the expense of consumers. Surging energy costs have been a key contributor to decades-high inflation.”
CVX Stock and the Political Battle
While shareholders of CVX stock are no doubt smiling at the results, the Q2 earnings bonanza contrasts sharply with the pain at the pump. According to the latest consumer price index report, inflation hit 9.1% over the 12 months ended June 30. While prices of most goods and key services have increased, the focus is clearly on energy.
Over the past year, energy prices have skyrocketed 41.6%. Per the U.S. Bureau of Labor Statistics, the main culprit was fuel oils and other fuels, which soared a whopping 70.4%. Motor fuel (including gasoline) jumped 60.2%. Finally, utility (piped) gas service was up 38.4%. Invariably, then, the framework presents a stark contrast between struggling households on Main Street and the windfall on Wall Street.
However, oil companies claim they are raising output. In addition, they maintain that economic headwinds impacting other industries – particularly friction points with labor – also negatively affect the energy sector.
“We more than doubled investment compared to last year to grow both traditional and new energy business lines,” Chevron CEO Mike Wirth mentioned in a statement.
While Chevron’s downstream earnings of $3.52 billion, which include the finished products segment, represented the biggest magnitude increase at a 320% lift year-over-year, the upstream (exploration and production) segment saw massive nominal gains to $8.56 billion from $3.18 billion one year ago.
Why It Matters
With the midterm elections on the horizon, it’s almost guaranteed at least some politicians will use the meteoric rise of CVX stock to score talking points with the American electorate. At the same time, the great oil debate is hardly clear-cut.
Additionally, the American Petroleum Institute – which, to be fair, bills itself as a representative of “all segments of America’s natural gas and oil industry” – noted that in 2014, “public and private pension and retirement plans, including 401(k)s and IRAs, hold 46.8 percent of all the shares of U.S. oil and natural gas companies.” If so, Chevron’s big day will certainly brighten retirement portfolios.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
