ITV News Business and Economics Editor Joel Hills reports on how bumper profits from energy firms have prompted growing calls for minister to tax companies further to help households with rising bills
It’s raining oil and gas money at BP and the deluge is forecast to continue for the foreseeable.BP’s business breaks even when Brent oil hits $40 a barrel. Between April and June a barrel of Brent averaged $114.This morning, BP reported a profit for the period of $8.5 billion (£6.9 billion) - a near record high.
“We’re capturing the upside from higher market prices,” explained BP’s boss, Bernard Looney, this morning.That’s one way of putting it. Others are less generous.“A slap in the face to struggling families,” is the Lib Dem’s take. “Fossil fuel companies are laughing all the way to the bank,” exclaims Greenpeace, urging the government to “bring in a proper windfall tax on these monster profits”.In the space of just two years BP has swung from a record loss (£4.7 bn in 2020) to eye-popping profitability without really having done anything differently.
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The whole of the industry cut investment in the first year of the pandemic, inadvertently creating the perfect conditions for oil and gas prices to head into the stratosphere as pandemic restrictions lifted before shooting into outer space when Russian tanks rolled into Ukraine.Oil majors everywhere suddenly finds themselves awash with cash at a time when motorists are paying record prices at the pump and households and businesses face crippling energy bills.
“We understand, we get it,” insisted Looney this morning. He explained that BP was “helping” to numb the pain that many of its customers feel by investing in its UK business and creating jobs.
BP also expects to pay bumper taxes on its bumper profits - the North Sea alone will generate £1 billion in revenues for the Treasury this year. The government’s new Energy Profits Levy will raise even more money, although Mr Looney declined to offer guidance on how much more.The contrast in fortunes between energy companies and their customers is stark and is set to get starker.BP predicts oil and gas prices will “remain elevated”. The longer these exceptional profits persist the higher the risk that BP’s policy of “maximising returns” for shareholders will enrage its customers, the greater the likelihood of further political intervention.
For now though, the business continues to throw-off “surplus cash” at an astonishing rate - $6.5 billion (£5.3 billion) between April and June alone.
BP is using much of this money ($3.5 billion) to buy back shares and reduce net debt.Fair enough, shareholders are entitled to a share of the spoils and resizing the balance sheet seems perfectly sensible.But it is both striking and perhaps odd that BP is choosing not to use any of the windfall that has fallen into its lap to ramp-up its investment in renewable energy.The company plans to hit net zero emissions by 2050.