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Energy Giants Spoilt with Cash

Last year the largest five energy companies reports a combined profit of $200Bn. This excludes Middle Eastern companies that surpass these profits by many folds. The focus is on the USA and European companies as these countries face the highest inflation rate caused by an energy crisis.

Though part of this crisis was created by themselves as sanctions were applied to Russian supply in response to the Ukraine conflict. But a majority of this crisis is due to the decade of under-investment at cost of hyper-focus on renewable sources.

This should make the use of extra cash simple for these companies as they would put it back into the business to create new supply capacity.

But when the political decisions do not favour or incentivise the investments in these sectors and the return on these projects is uncertain due to oil price volatility. The simple choice becomes the difficult one. This is why most companies are returning this cash to shareholders informing buybacks and dividends.

This would result in a major problem especially for Europe as it requires a large capacity creation in terms of oil & gas. If this does not happen in the next few years then the major manufacturing companies would be forced to shift the plants out of the bloc. This would add to the list of problems for Europe which is already seeing an am ageing population crisis.

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