Bumper BP profits of £4bn. image source: GETTY IMAGES
BP, a multinational oil and gas corporation, reported significant profits at the beginning of this year as a result of the continued high price of energy.
Despite falling from $6.2 billion to $5 billion from last year, the company’s earnings are still healthy.
The dip is related to the drop in oil prices that occurred after Russia invaded Ukraine and had an impact on the profitability of the sector.
Demands for increased tax income from energy businesses have arisen as a result of their huge profits, particularly in light of the fact that families already pay inflated energy prices.
Both the Liberal Democrat and Labour parties have demanded changes to the windfall tax.
Labour Party leader Sir Keir Starmer has called for the imposition of a “proper” windfall tax on energy earnings.
While it is acknowledged that oil and gas companies like BP require profits to invest, the unexpected profits that they have made due to the inflated global energy prices have caused concern.
Liberal Democrat leader Ed Davey expressed his dismay at the “eye-watering profits” and their impact on individuals and families struggling to pay their energy bills.
He further criticized the government for failing to hold the oil and gas companies accountable for their profits, which run into billions, while citizens and enterprises grapple with the high cost of gas and electricity.
BP experienced a record year of profits in 2022, along with the entire energy sector, after the surge in oil and gas prices subsequent to Russia’s annexation of Ukraine.
While this has resulted in significant profits for energy companies, it has also contributed to the rise in energy costs for households and businesses.
BP’s CEO, Bernard Looney, characterized the first quarter’s outcomes as “strong performance.
” The company’s gas marketing and trading had an “exceptional” outcome, with “very strong oil trading” also being reported.
Nick Butler, a former BP executive and a visiting professor at Kings College London, noted that the firm’s robust results were due to “good internal business performance” and the high energy prices worldwide.
However, in an interview with the Today program, he predicted that the company’s profits would decline significantly this year as oil and gas prices were decreasing.
The UK government introduced a windfall tax last year called the Energy Profits Levy (EPL), which is levied on revenues earned from UK oil and gas extraction.
The EPL rate is set at 35%, and when combined with pre-existing taxes imposed on oil and gas firms, the overall tax rate in the UK rises to 75%.
However, businesses can lessen their tax liability by accounting for losses or investments in alternative energy sources.
The corporation paid $3.4 billion in taxes worldwide during the first quarter of 2023, of which $650 million was paid in the UK and roughly $300 million was payable to the EPL.
Since the EPL went into effect, BP has confirmed that it has paid an additional $1 billion in taxes.
This summer, with wholesale gas prices declining, there is hope that household expenses would go down.
Additionally, since the Ukraine invasion, when it peaked at nearly $128 per barrel, the price of Brent crude oil has dropped to about $80 per barrel.
However, according to BP, the cost of gas and oil in Europe will continue to be higher than average for the remainder of the second quarter, which ends in June.
The average household’s annual energy costs are capped at £2,500 according to the UK government’s Energy Price Guarantee, but this support is set to stop at the end of June.
But according to experts, the drop in wholesale prices will cause energy costs to drop below this cap in July. The Energy Price Guarantee might therefore become obsolete.
Protest against emissions
BP faced backlash earlier this year after stating that it will cut back its objective for lowering emissions by the end of the decade.
Several major UK pension funds voted against reappointing BP’s chairman, Helge Lund, at the company’s annual general meeting last week in protest of this decision.
BP responded by saying that company values “constructive challenge and engagement.”
Greenpeace’s Charlie Kronick responded to BP’s recent results, arguing that it is now the government’s job to intervene and demand that BP and other oil firms accept responsibility for the devastation they are bringing to the environment.
He proposed that the oil sector carry the financial burden of mitigating the catastrophic climatic effects that are already affecting various parts of the planet.