BP’s profits labelled ‘heinous’ as calls grow for tougher windfall tax

Bumper profits at BP have been labelled “heinous” and sparked renewed calls for a tougher windfall tax, after the oil and gas giant recorded one of its best ever starts to the year while Britons struggled to pay high energy bills.

The energy company said its underlying profits reached $5bn (£4bn) in the first three months of the year, outstripping analysts’ forecasts of $4.3bn.

It represents the second-best results for the first quarter it has notched up since 2012, when it made $4.7bn, behind last year’s $6.2bn.

BP said its results had been boosted by reduced refining costs, an “exceptional” result in its gas trading arm and a “very strong oil trading result”. Volatility in the energy markets has increased revenues in the trading divisions of oil companies.

The company said it would reward investors, buying back $1.75bn of its own shares, a slowdown on the $2.75bn bought during the previous quarter. Shares fell by 5% on Tuesday morning, making it one of the top fallers on the FTSE 100.

The results will return attention to the debate over whether oil and gas firms should face a harsher windfall tax on their profits.

Paul Nowak, the TUC general secretary, said oil and gas companies were treating the British public “like cash machines

He said: “These eye-watering profits are an insult to working families as millions struggle with sky-high bills. The government has left billions on the table by refusing to impose a proper windfall tax on the likes of BP. And even now ministers are refusing to take action to fix our broken energy market and stop this obscene price gouging.

“We could have lower household bills and an energy system that served the public, if government taxed excessive profits, introduced a social tariff and created public ownership of new clean power.”

Global Justice Now, the campaign group, said: “Today’s heinous profits from BP are another kick in the teeth to the millions of people who can’t afford to heat their homes.”

Labour on Monday night called for the energy profits levy, introduced last year, to be made tougher in order to fund a freeze on council tax for cash-strapped households.

Oil and gas prices have fallen back since last summer, when commodity prices rose sharply after Russia’s invasion of Ukraine. Concerns over the health of the global economy have weighed on oil prices, while gas prices have eased after a mild winter meant demand in Europe was not as high as feared.

However, gas prices remain well ahead of where they were before the onset of the energy crisis in 2021, meaning consumer gas and electricity bills are expected to remain higher than historic averages for at least the remainder of the year.

The commodity price boom has fed through to oil and gas companies’ profits, and led the government to introduce a windfall tax on North Sea operators.

On Tuesday, BP said it had incurred $3.4bn of taxes worldwide during the quarter. That encompassed $650m on its UK North Sea business, including about $300m because of the windfall tax. In 2022, BP paid $2.2bn on its North Sea business, including $700m in windfall taxes.

BP has also been in the crosshairs of green campaigners, after it scaled back climate goals earlier this year. Last week, climate protesters disrupted BP’s annual general meeting, where the oil company faced a backlash from some shareholders over the weaker climate commitments. Some protesters were forcibly removed.

Labour has said the UK windfall tax should be expanded to capture profits made from refining oil and selling fuel, and a tax break on fossil fuel extraction should be scrapped.

The shadow energy secretary, Ed Miliband, said: “The Tory windfall tax is still full of get-out clauses with billions being bunged at oil and gas companies in special subsidies not available in any other part of the energy sector.”

Murray Auchincloss, the BP finance chief, said: “We know how difficult a time it is. We get it.” He said the company would focus on making investments, including in low carbon energy, paying taxes and dividends.

On the calls for a strengthened windfall tax, he said: “Taxes are for government, not us. We are not going to speculate.”

Auchincloss said that its gas trading arm had performed well, signing contracts for delivery in 2024 and betting that gas prices would fall sharply in early 2023. “The traders made the right call,” he said.

The US oil companies ExxonMobil and rival Chevron last week posted booming profits, and Britain’s Shell will report on its first-quarter trading on Thursday. The increase in profits has helped companies recover from the impact of Covid lockdowns, which sent demand for fuel plunging.

BP said it made $3.6bn in investments during the quarter. It has faced criticism over the balance between spending on oil and gas and low carbon energy.

The company highlighted its investments in oil and gas in India and the Gulf of Mexico, as well as low-carbon hydrogen and carbon capture and storage projects in the north-east of England.

 

 

 

cover photo:BP has been in the crosshairs of green campaigners after it scaled back its climate goals earlier this year. Photograph: Arnd Wiegmann/Reuters