Corporations are like worms. Different types of worms serve different functions in nature, some more threatening to humans than others. Their complex, resilient systems are worth studying in large part because of how critical they are to the world where we live. Earthworms, for instance, are a key food source for other creatures and transform organic matter into valuable nutrients via their constant eating and shitting. These vital functions make them among the most important species on the planet.
All worms boil down to a few basic parts: a long, tube-like body, mouth, gut, and anus. Lacking brains and consciousness, they’re driven mainly by external stimuli through the nervous system. Worms can perceive light and sound, and harbor a developed sense of touch and taste that alerts them to favorable and unfavorable environments. Their only “desire,” as far as we know, is survival: Worms don’t have ethics, just an inborn will to go about the world, avoid danger, and reproduce. A tapeworm isn’t evil just because it’s taken up residence in your intestines. But you certainly don’t want it to stay there.
Corporations, similarly, shouldn’t be expected to do anything other than pursue their own survival. It’s why making moral appeals to them—to meet energy security needs, bring down gas prices, or reduce emissions, for instance—can sound so strange. “It’s time for these companies to stop war profiteering, meet their responsibilities in this country, and give the American people a break and still do very well,” President Biden said during his speech about fossil fuel industry price gouging earlier this week. But corporations don’t have responsibilities to either the country or the American people.
Like earthworms, fossil fuel companies provide what is still an invaluable service to the world: eating up crude oil and methane gas and shitting out a fuel source. Amid soaring energy prices, they’ve made spectacular money doing so: BP, Shell, Total, Exxon, and Chevron generated $58 billion in profits during the most recent quarter. Biden wants more of those funds to be funneled into additional production and bringing down costs. But that’s not necessarily up to executives at those companies. Their primary and arguably sole legal responsibility is to shareholders that keep the compost machine going. They also typically want to get paid. BP has so far bought back $8.5 billion worth of shares this year, while Shell has bought back $18.5 billion on top of fat dividend payments. Quarterly earnings calls—events that feature a presentation by top executives followed by a back and forth with analysts and investors—show how this works.
On Chevron’s recent third-quarter earnings call, J.P. Morgan Chase analyst John Royall questioned executives about their having “generated free cash flow well in excess of both your dividend and the buyback at the top end of the range.” Free cash flow might otherwise go toward the kind of productive investments Biden has been calling for. “So my question,” the analyst continued, “is do you think you could go further than the $15 [billion] at the top end?” referring to the maximum amount Chevron management said they would offer in share buybacks. CEO Mike Wirth responded dutifully. “Yes. John, we’ve actually increased our rate of buybacks three times this year. We announced the first one at the end of last year,” he said, adding that Chevron is “at an all-time high in terms of the rate of share repurchases.”
Chief financial officer Pierre Breber continued: “I’ll just point out that we increased our dividend 6 percent earlier this year. We’ve been growing our dividend at a compounded annual growth rate of 6 percent for 15 years. And that is our first financial priority.” (My emphasis.)
This “relationship between two capitalists,” as Marx called it, can be a tense one. Biden sees fossil fuel companies as service providers whose main job is to deliver fuel to their customers. They exist primarily, though, to serve shareholders. Corporate managers in the fossil fuel sector, especially, are increasingly rankled by the stunning amount of ownership and decision-making power held by major asset managers like Blackrock. (Fossil fuel–funded Republicans have accused these firms of conspiring to enforce a “woke” green agenda—if only!) In any case, drilling, refining, and distribution is somewhat incidental to returns—it’s where the profits generally come from, of course, but they’re delivered to investors “as mere compensation for owning capital that now is entirely divorced from the function,” Marx noted, observing the precursors to modern corporations. In recent years, oil and gas investors have been adamant that companies produce less and deliver them more.
There is a way to insulate the energy sector from these dynamics, which many governments the world over have already pursued in the name of not trusting private investors to manage important national resources. The governments of Saudi Arabia, as well as Mexico, Brazil, and Norway (to name just a few) all hold controlling shares in state oil companies, giving them more say over production and distribution.
Biden isn’t pitching any dramatic overhaul in the private control of the U.S. oil and gas industry, of course: He won’t command an army of polluting worms anytime soon. His proposal last week was for a windfall tax on their profits, seemingly intended as a stick to goad companies into investing their excess cash flows in boosting production and lowering prices.
This may piss off fossil fuel executives, but it probably doesn’t worry them: A windfall tax would face an uphill battle even in this Democrat-controlled Congress, which has precious little time left to pass legislation before Republicans likely claim majorities in one or possibly both chambers next week. Public ownership (i.e., nationalization) would likewise be a hard political sell, even if some kind of public option might be the most straightforward way for the administration to—at least in theory—balance competing goals on affordability, energy security, and climate in the longer term.
For now Biden seems confined to shaping the environment where this country’s fossil fuel worms—possessed by their investors—eat and shit. Without a more credible threat, though, he won’t get too far appealing to hearts and minds they don’t have.
