- by Graham Holton
- The Guardian
- Issue #2202
Photo: arbyreed – flickr.com (CC BY-NC 2.0)
One-fifth of the world’s traded oil passes through the strategic Strait of Hormuz. The outbreak of the US-Iran conflict interrupted Gulf oil and petroleum product exports, forcing up international prices generating windfall profits for companies.
While company production remained largely unchanged, profits increased, allowing the largest international oil companies to generate over US$90 billion in profits during the first three-months of the conflict.
Karl Marx distinguishes between profits generated through production, and gains arising from monopoly, scarcity and differential rent. The present conflict provides an example of scarcity and differential rent, where the control of a scarce strategic resource has enabled corporations to capture massive windfalls.
From a Marxist perspective, this war illustrates how capitalism can transform geopolitical crises into opportunities for capital accumulation. The conditions of scarcity increased the exchange value of strategic commodities.
Oil companies have appropriated extraordinary profits without proportionate increases in labour or production costs, meaning wealth is redistributed from consumers to the owners of energy capital.
Geopolitical instability becomes a mechanism for the concentration of capital, with the energy companies benefiting from sharply higher oil prices and increased market volatility.
While war imposed significant costs on governments, workers and consumers through inflation and energy insecurity, it simultaneously generated exceptional profits for multinational oil producers, refiners and commodity traders. This contrast highlights how geopolitical crises redistribute wealth unevenly, with the owners of strategic resources emerging as major financial beneficiaries.
Financial markets added a substantial “war risk premium” to oil prices. Brent crude oil rose from around US$70 per barrel before the conflict to well above US$100, briefly exceeding US$120.
Producers far from the Middle East benefited when their oil was sold on the global markets. ExxonMobil has made a US$14.5 billion profit and Chevron US$12 billion. Shell has made US$10 billion in adjusted earnings, and BP profits have more than doubled compared with the previous financial year.
Oil refiners outside the Gulf experienced higher refining margins with the increase in demand for gasoline, diesel and jet fuel. Some of the world’s largest refining companies have reported high quarterly earnings. The disruption drove up refining margins, with Phillips 66 recording refining earnings jumping to US$3.09 billion and realised refining margins more than doubling to US$24.08 a barrel. Other US refiners also recorded the strongest earnings since 2022.
Commodity trading firms profited from rapid price movements, regional shortages and arbitrage opportunities created by wartime market instability. Large shareholders benefit as profits increased dividends, and provide higher shareholder returns, with a significant proportion of wartime profits flowing directly to institutional investors and shareholders. Existing oil reserves became far more valuable.
Higher oil prices spread throughout the economy, with increased petrol, diesel, and fertiliser prices transport costs, food prices, and costs for manufacturing and agriculture. Higher prices forced up electricity generation prices increasing inflation.
Consequently, households and businesses effectively transferred billions of dollars to energy producers and traders through higher fuel prices. Windfall profits will continue as the war continues.
