BP’s chief executive has dismissed rising calls for a windfall tax on fossil fuel companies to help UK households weather the record surge in global gas prices after his company made its biggest profits in eight years.
The FTSE 100 oil giant swung to a profit of $12.8bn (£9.45bn) for last year, from a loss of $5.7bn the year before, after cashing in on historic highs in the market price for gas and oil which have fuelled a cost of living crisis for Britons.
BP’s profits for the final quarter of last year leapt 35-fold to $4.1bn, from a modest profit of $115m in the same period last year, as gas prices across global markets reached new all-time highs, and the international oil price reached a seven-year record towards the end of the year. Its chief executive, Bernard Looney, has said that BP becomes a “cash machine” at those prices.
The historic profits have put BP shareholders in line for a $1.5bn share buyback in the first quarter of this year. British households, on the other hand, are braced for one of the steepest energy tariff hikes on record this April, with prices all set to rise even higher by next winter due to a global squeeze on gas supplies that has fuelled record high energy market prices.
But Looney said a windfall tax would do little to solve the global energy supply crisis, which requires major investments in low-carbon energy sources that can help to secure energy supplies while being “clean and affordable too”.
Looney told the Guardian: “What we really need to do right now is make sure we are investing in the energy that we need to help the world transition [from fossil fuels].”
The historic profits revealed by oil companies including BP and Shell have refuelled calls for a windfall tax on oil companies; such a tax could fund extra financial help for struggling bill-payers.
Opposition parties and green groups were united in calling on the government to tax the company in order to bolster the Treasury’s £9bn rescue plan to reduce energy bills across the country.
The Liberal Democrat leader, Ed Davey, said: “The truth is that this is about basic fairness. It simply cannot be right these energy companies are making super profits while people are too scared to turn their radiators on and terrified there will be a cold snap.”
Rachel Reeves, the shadow chancellor, tweeted: “The chancellor’s energy plans last week left families more worried than ever. It’s time for Labour’s plan for a one-off windfall tax on oil and gas producers to cut bills.”
BP’s rival Shell last week reported a quadrupling of profits to $19.3bn for last year, its highest in eight years. In the US, the oil giants ExxonMobil and Chevron reported net profits of $23bn and $15.6bn respectively for last year – the highest since 2014, when crude last traded above $100 a barrel.
The rising calls for a windfall tax were dismissed by Shell’s boss, Ben van Beurden, last week. He said: “I’m not convinced that windfall taxes, popular though as they seem, will help us with supply, nor is it going to help us with demand.”
Chancellor Rishi Sunak also rejected calls for a windfall tax last week, saying oil companies already contribute to the exchequer by paying a higher rate of corporation tax and an extra tax would deny the sector the funds it needs in the switch to low-carbon sources of energy.
Alongside BP’s bumper profits, the company set out an updated strategy to spend almost half of its capital on business activities which contribute to the global energy transition, such as electric vehicle charging, renewable energy and biofuels this decade. It also plans to boost its investment in the UK.
BREAKING: Soaring profits from BP, days after Shell recorded ‘momentous’ results.
— Rachel Reeves (@RachelReevesMP) February 8, 2022
The Chancellor’s energy plans last week left families more worried than ever.
It’s time for Labour’s plan for a one-off windfall tax on oil & gas producers to cut bills.https://t.co/dU1iy0eOHG
Looney told the Guardian: “When oil prices are high, we make more money and we make no secret of that. But it is literally just 12 months ago that BP recorded the largest loss we’ve made in our history. And the reason for that was because [in 2020] oil prices were, at times, negative,” he said.
“I hope objective people look at this and realise that we had to halve our dividend. Around 10,000 people lost their job. It was very difficult,” Looney added.
The company’s share price plunged to a 25-year low during the global commodity market slump in 2020, after the company set out plans to increase its investment in clean energy while cutting its production of oil and gas by 40% by the end of the decade.
BP’s market value has increased in line with rising oil and gas prices but it remains about 16% lower than before the pandemic.
