BP has scaled back its climate ambitions as it announced that annual profits more than doubled to $28bn (£23bn) in 2022 after a sharp increase in gas prices linked to the Ukraine war boosted its earnings.
In a move that will anger campaigners, the oil and gas giant cut its emissions pledge and plans a greater production of oil and gas over the next seven years compared with previous targets.
The huge annual profit led to renewed calls for a toughened windfall tax, as oil companies reap rewards from higher gas prices while many households and businesses struggle to cope with a sharp rise in energy bills.
Responding to the news Liberal Democrat Leader Ed Davey MP said:
Yet another oil giant has been allowed to rake in huge profits from Putin’s illegal invasion of Ukraine, while families choose between eating and heating.
Rishi Sunak has failed the people of this country by ignoring calls for a proper windfall tax.
This Conservative Government need to start putting people first instead of allowing energy bills to rise again this April.
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18 Comments
Rishi Sunak didn’t ignore calls for a windfall tax, he deliberately constructed it so badly it was almost totally ineffectual.
It is essential that a really tough and radical motion will be brought to conference in York showing a real Lib Dem alternative to this pathetic smokescreen Windfall Tax, worded in such a way to make it noticeable to the media, and not the usual bland platitudes we usually debate that wouldn’t even cause a ripple of concern in a convent.
It needs to be a levy, not a tax. It needs to be a levy on all organisations that have achieved super returns (not just profits) because of rising energy prices, and it needs clear it will be backdated.
In addition it needs to “condemn Rishi Sunak’s fig-leaf of a Windfall Tax, deliberately designed so that those who have benefited the most can avoid it the easiest” while leaving “those who have suffered the most, the ordinary people of the UK, having to pay the bill for decades to come through increased taxes, more austerity and pay cuts.”
Might “Windfall Tax” be a misnomer?
Might “Greed Tax” be more accurate?
Yes Steve, like the utilities, more and more. Make those pay who are already over stretched.
Mr. Craig Murray has some interesting comments on this matter.
https://www.craigmurray.org.uk/
No perfect solution but quite galling that those profiteering most from energy crisis now (and historically) will be those best placed to protect themselves from worsening impact of climate emergency despite being major players in both.
Something being galling doesn’t necessarily make it good or workable political policy, just how I’m feeling about it.
@Steve Trevethan
BP is reaping a windfall due to the decision of Western countries to boycott supplies from Russia as this has forced up the market price. You may think a ‘greed tax’ is a way to categorise the situation but I don’t believe it is the actions of BP that have led to the windfall they are now enjoying.
@Mel – quite agree with you. These are what we used to call super normal profits – being profits over and above what they would normally expect to make due to certain special circumstances. It’s not breed on the part of the oil companies.
Generally think most conservative voters would support a windfall tax on this.
In the years that Shell make less profit, it’s obviously because they are less greedy at that time.
In 2021, Shell made a 16bn pound loss: in that year they were not greedy at all.
I wonder whether they will be greedy next year?
Perhaps a general question from this particular instance is the degree and reasoning for a very powerful organisation to charge customers to an extent which harms them?
Perhaps another question is the extent to which ditto charges more if there have been no additional costs to extraction, transportation, research and development, advertising etc?
To whom do the increased/excessive/extractive profits go ?
Oil, and fossil fuels, and energy in general are inelastic in both supply and demand. This means that any mismatch between the two leads to very large excursions in price. In the recent past we have actually had negative prices for short term oil futures as well as over 100USD/bbl.
Jenny Barnes 8th Feb ’23 – 11:58am:
In the recent past we have actually had negative prices for short term oil futures as well as over 100USD/bbl.
Gas too…
‘Texas Natural Gas Prices Go Negative’ [October 2022]:
https://oilprice.com/Energy/Natural-Gas/Texas-Natural-Gas-Prices-Go-Negative.html
it’s unfortunate that it’s far less easy to move gas around: either you need a pipeline (Nordstream!) or an LNG train to liquefy it for ship transport, and of course suitable ships, regasifying terminals the other end etc.
Shell’s large losses in 2021 were the result of a giant write-down in the investment value of the company’s oil fields and prospects following the anticipated shift towards greener forms of energy. The Ukraine war has boosted the market price of oil and gas for the reasons Jenny notes in her comment.
Pension funds and other big investors are pushing hard to get oil companies to invest in green energy to sustain their stream of dividend income in the future. The same pension funds, however, are reliant on the big stream of dividends that flows from the oil business. The shift to net zero is a tricky business for investors and the current and future pensioners that rely on the returns these funds generate.
There is a good case for taxation of excess returns generated from natural resources and government granted licenses. The key is to ensure it is sustainable.
Profits from oil and gas production in the North Sea are a relatively small proportion of UK companies profits and offset by decommissioning costs.
Consequently, on the consumer side, their needs to be a basic normal allowance for domestic electricity and gas usage incorporated within the fixed standing charge. Only once this individual allowance is exceeded should additional usage charges be levied.
Joe, how rational you are!
It’s all down to how greedy those wicked oil men are every year.
And all those wicked profits not only are used in capital expenditure – what businesses invest with profits? Shock horror. That has to stop.
But also they pay dividends! OMG! You mean people want to be rewarded for investing their money? Those wikked fat cats should give their money free of charge.
These obscene profits by Shell and BP show clearly the lack of commitment by those allowing them to tackle the climate challenge. For the part of the profit that is taxed in the UK there should be a much higher windfall tax. Even better would be banning all companies from withdrawing any fossil fuels from that section of the oceans that fall within this government’s jurisdiction.
@Peter – “For the part of the profit that is taxed in the UK there should be a much higher windfall tax.”
How high do you want the windfall tax to be?
The companies such as Shell and BP with UK businesses are paying 75% tax on their UK profits. I expect Equinor (the largest supplier of gas to the UK), being based in Norway will pay little if no windfall tax as its UK activities are basically “extraction activities” ie. not sales of what comes out of the wells.