LONDON (Parliament Politics Magazine) – Following a spike in oil and gas prices, BP announced its largest quarterly profit in 14 years.
Between the months of April and June, the energy giant’s underlying profits increased by more than three times to $8.45 billion (£6.9 billion).
It occurs at a time when the average household’s annual energy bills are expected to exceed £3,600 this winter.
Appeals for the government to tax businesses more heavily in order to assist families with growing costs have been sparked by the record profits.
Following record profits from rival Shell and enormous earnings from British Gas owner Centrica last week, BP’s profits this quarter were the second-highest in the company’s history for the second quarter.
Energy provider Ecotricity’s founder, Dale Vince, stated that BP was keeping a boatload of money that was coming from hard-pressed bill-payers in the country, and that he thought it was time to raise taxes on the earnings of oil and gas firms.
He said on the BBC’s Today show that obviously there were unusual windfall profits in the oil and gas sector, and evidently there was a problem in the energy market, and they needed to remedy one with the other.
A stronger windfall tax on oil and gas business profits was also demanded by campaign groups Friends of the Earth and Greenpeace, along with the Liberal Democrats and Labour.
As part of a package of initiatives to assist citizens with their energy bills, the government has offered a £400 discount. In response to political pressure, ministers also said that oil and gas companies would be required to pay an additional 25% of profits made in the UK in May.
Additionally, only UK-based profits—a minor portion of operations for the majority of oil and gas companies—are subject to the tax. It represents one-tenth of all oil and gas output for BP.
Although the amount of tax BP has paid on its earnings since the windfall tax was implemented is unknown, the company won’t be compelled to pay the levy on the majority of its earnings between April and June because of when the policy was brought into practice.
The Energy Profits Levy, a windfall tax, is estimated to generate around £5 billion in revenue in its first year, according to the Treasury, which stated that it would not comment on “individual taxpayers.”
What is increasing profits?
The war in Ukraine has caused a rapid spike in oil and gas prices, which has contributed to the enormous rise in profits for businesses.
Following the invasion, Russia has recently cut back on supplies to Europe, and there are rising concerns that it may shut off the taps entirely.
The possibility of gas supply issues has caused the wholesale price to jump, which has forced energy companies to pass those costs on to customers, driving up home energy costs by record levels.
Though prices have begun to somewhat drop, higher oil prices have also caused petrol and diesel to hit all-time highs at the pump in recent months.
Energy bills at this moment in time appear to be on track to remain high through 2023 and into 2024, Dr. Craig Lowrey, chief consultant at Cornwall Insight, warned on the BBC’s Today programme. He added that increased bills were a long-term challenge for homes.
Despite making a “dent” in rising expenses, he claimed that the government’s present assistance was not going to counteract this.
Cash machine
Following its record-breaking profit results, BP said that it would increase payouts of shareholders by 10% and buy back shares to reflect its stronger profitability.
CEO Bernard Looney referred to the energy industry as “a cash machine” last year.
On Tuesday, however, he claimed that the company’s employees had contributed to the resolution of a “energy trilemma” that resulted in safe, affordable, and reduced carbon energy.
They accomplished that by supplying the oil and gas that the world required right then while also making investments to accelerate the energy transition, he said.
Strong refining margins and oil trading, according to BP, helped it increase profits.
The half-year figures of the company, however, took a significant $19.9 billion hit as a result of its decision to sell nearly 20% of its share in Russian oil producer Rosneft in response to the war in Ukraine.
According to Richard Hunter, head of markets at online investment company Interactive Investor, BP had already made some strong progress towards recovering the financial losses incurred as a result of its decision to leave Russia, and its most recent financial results were “an early indication of the company’s ability to repair such damage.”
