AI Summary
5 min readIn 2022, the world’s largest energy firms—BP, Shell, and TotalEnergies—are on track to earn an estimated $15 to $20 billion in profit from trading alone, a figure that could account for one-fifth of their total profits and add a third to their return on capital. This is not because they are simply selling their own oil at higher prices. The less visible story is that these European majors have built secretive, highly profitable trading operations that buy and sell other people’s oil and gas, and they have become exceptionally good at it during the chaos of the Ukraine war.
What trading means for an oil major
Trading is distinct from marketing. Marketing means selling what you produce. Trading means buying someone else’s barrels and selling them to whoever wants them most. The key metric is not the price level but the spread—the difference between the purchase and sale price. Spreads widen when markets are chaotic, because war or supply shocks create local shortages and a premium on getting product immediately rather than later. The European majors—BP, Shell, and TotalEnergies—now trade an estimated $40 to $50 million per day of oil and gas, which is five to ten times more than what they produce. That ratio shows how central trading has become to their business model.
Why the Europeans dominate
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What you'll learn
- 1 (02:14) **Oil Majors' Secret Trading Success** - Introduction to the hidden driver of oil majors' profits during the oil shock: their massive trading operations, not just high oil prices.
- 2 (03:41) **The European Majors Leading the Game** - Identifies BP, Shell, and TotalEnergies as the dominant players, trading 40-50 million barrels per day—5-10 times their own production.
- 3 (04:52) **Why American Majors Lag in Trading** - Historical and geological reasons: American firms had vast domestic resources and markets, so never needed to build sophisticated trading arms.
- 4 (06:01) **The Secret Sauce: Intelligence from Global Operations** - How European majors trade so successfully: they harness information from their vast global network of fields, refineries, and tankers to predict price direction and exploit volatility.
- 5 (08:15) **Why Competitors Struggle to Replicate the Model** - Trading only works at scale; American majors tried half-heartedly before, limiting trader independence and budgets.
- 6 (11:29) **America's AI Regulation Reversal** - The Trump administration's dramatic shift from deregulation to de facto licensing of frontier AI models, driven by safety concerns over rapidly advancing capabilities.
- 7 (14:19) **The Messy Implementation of AI Controls** - Despite a June executive order emphasizing voluntary sharing, a de facto licensing regime has emerged, opaque and inconsistent.
+ Full timestamped outline available in the app
Show Notes
Big oil firms keep one part of their business hush-hush: trading. Amid an almighty oil shock, the majors’ trading arms are raking it in. But competition is mounting. We look at the Trump administration’s messy attempts to regulate frontier AI models, and how that may cost America its AI edge. And why the biggest music tours are going to fewer places.
Guests and host:
- Matthieu Favas, commodities editor
- Shashank Joshi, incoming Washington bureau chief
- Vicky Jessop, culture writer
- Jason Palmer, co-host of “The Intelligence”
Topics covered:
- oil majors, oil trading
- AI, frontier models, American regulation
- music business, concert tours
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