Activists call surging oil and gas profits ‘horrifying’ as energy giants post profits twice as high as 2025

Middle East war-driven supply disruptions have pushed Brent crude to around $110 a barrel, boosting profits for major oil companies and lifting BP’s Q1 profit to $3.2 billion from $1.38 billion a year ago. Oxfam says the six biggest fossil fuel firms could earn $94 billion in 2026, while drivers face sharply higher fuel costs, including an average U.S. gasoline price of $4.18 per gallon. The article also highlights growing political pressure for windfall taxes on oil and gas firms in the U.K., EU, and U.S.

Analysis

The cleanest read-through is that the market is still underestimating how long the “higher for longer” oil regime can persist once shipping infrastructure is impaired. The second-order effect is not just stronger upstream cash flow; it is a widening gap between firms with trading/marketing exposure and those more levered to gas or with weaker downstream optionality, which should favor the European integrateds over pure producers in this tape. In that setup, Shell and TotalEnergies have the best mix of near-term earnings beta and balance-sheet flexibility, while Chevron and ConocoPhillips are more exposed to any later normalization in realized pricing because their equity cases are more directly tied to commodity duration.

The biggest near-term risk is political, not operational: if gasoline remains a consumer flashpoint, windfall-tax rhetoric can move from background noise to tangible policy risk within weeks, especially in Europe. That matters because the market is likely capitalizing current windfalls as though they are repeatable through year-end, yet the more visible the profit spike becomes, the greater the probability of accelerated tax proposals, buyback scrutiny, or forced pricing interventions that compress equity returns before they hit the P&L. In other words, the cash flow is real, but the distribution of that cash to shareholders is less certain than the earnings headlines imply.

The consensus is probably overconfident that this is purely an oil-price story; the more important variable is disruption duration. If logistics remain impaired for months, the winners are not just the E&Ps but the names with trading desks and integrated supply chains that can arbitrage regional dislocations, while midstream and gas-linked assets could lag if production damage persists. The contrarian risk is that a ceasefire or corridor reopening can hit sentiment faster than it hits physical flows, causing a sharp multiple contraction in the equities even if near-term earnings estimates stay elevated.

Key Decisions for Investors

• Go long SHEL vs CVX for the next 4-8 weeks: Shell should monetize trading volatility and downstream dislocations more effectively, while Chevron’s rerating is more exposed to oil-price normalization; target a 5-8% relative outperformance if Brent stays above $100.
• Add TTE on weakness into the next earnings print, but pair with a short-dated call hedge: TotalEnergies should benefit from the same integrated/trading dynamic, yet is more vulnerable to European windfall-tax headlines; structure for upside with defined political risk.
• Reduce outright long exposure to COP on strength and rotate toward an integrated basket: COP has strong commodity beta, but less protection if the market starts pricing a faster de-escalation; use rallies to trim into the earnings window.
• Buy short-dated XLE puts or put spreads as a hedge against a ceasefire headline: energy equities can gap down faster than the underlying commodity if policy relief or reopening expectations emerge, making downside convexity worth paying for over the next 1-3 weeks.
• Watch for European windfall-tax headlines as a catalyst to short SHEL/TTE on rallies only if Brent starts rolling over; otherwise, stay long the integrated names and hedge policy risk rather than fight the commodity trend.