‘Climate wrecking’ BP and Shell making ‘obscene’ record profits as normal working households across the UK face soaring energy bills

BP has followed Shell in reporting record annual profits and the businesses are handing billions of pounds to their shareholders.

Why is this happening at a time when people are struggling to pay for their energy, what is the Government doing, and what do campaigners and politicians want to happen?

Why are oil companies making record profits?

The record profits of £23 billion, announced by BP, and £33 billion by Shell are for last year.

Simply put, their profits are high because they were able to massively put up prices on the oil and gas they sell. The same has applied to other oil and gas companies in much of the world.

The price of gas in the UK hit an all-time high of around £8.50 per therm last August, compared to around 50p in the early part of 2021.

Oil prices also soared, to around 107 dollars per barrel in early June last year, from around 64 dollars a year earlier.

Much of this was down to Russia’s full-scale attack against Ukraine, which was launched nearly a year ago.

What are energy prices doing at the moment?

Both oil and gas prices have eased back from their recent highs. Oil now costs around 82 dollars per barrel, not an unusual level historically.

Gas prices have also dropped significantly from last year’s peaks. But at around £1.50 per therm they are still around three times higher than they had been through much of the 2010s.

What will happen to my energy bills?

Most households will see their energy bills soar again in April.

This might seem paradoxical but this is because of the impact of Government support.

At the moment the average annual bill is £2,500 under the Government’s support scheme for households. From April that support becomes less generous, and the average bill will rise to £3,000.

Without this support, the average bill would likely have fallen from £4,279 today to £3,338 from the start of April, according to the latest forecast from Cornwall Insight.

What is happening to oil company shareholders?

They are being handed massive payouts by the companies they own.

BP shareholders will get 24.08 US cents for every share in the company they own, a total payout of around 4.4 billion dollars, and 11% higher than the year before. The company will also buy back 2.8 billion dollars in shares from its investors.

What has the Government done?

Ministers have hit Shell and BP and other companies that operate in the North Sea with a 35% extra windfall tax amid their massive profits.

However this is limited to the companies’ North Sea operations. The Government does not tax profits that these companies make abroad.

They are also helping households with their energy bills. At the moment people pay 34p per unit of electricity and 10.3p per unit of gas that they use, a lot lower than would have been the case if the Government had not stepped in.

The Government has also offered an additional £400 energy discount to every household in the country and is supporting businesses with their bills.#

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What are others calling for the Government to do?

Labour has called for a loophole in the windfall tax rules to be closed. At the moment companies can avoid a lot of that windfall tax if they use their profits to invest in oil and gas in the North Sea.

Labour also wants the tax backdated and says that oil and gas profits should be taxed as much in the UK as they are in Norway. Together this would raise an extra £13 billion, the party says.

The Liberal Democrats have also demanded a “proper windfall tax” and Friends of the Earth have called for the “mega earnings” to be fairly taxed.

Greenpeace activists are demanding that the company stops expanding oil and gas production around the world, takes responsibility for fuelling the climate crisis, and pays up for the climate destruction it is causing everywhere.

Shell has attempted to silence Greenpeace International’s current peaceful occupation of its oil and gas platform at sea, by hitting the campaign group with an injunction late on Friday, February 3, threatening up to two years’ jail time and fines.

The Greenpeace France-chartered Merida trimaran and two small boats approached the White Marlin heavy-lift vessel, which is carrying Shell’s 34,000 tonne oil and gas platform to the North Sea.

Hussein Ali Ghandour, from Lebanon, speaking on board the Merida, said: “I come from the driest region of the world that is warming twice as fast as the global average. Across the Middle East and North Africa, droughts, raging forest fires, flash floods and other climate disasters are now part of our daily realities, aggravating our social and economic woes.

“It is big polluters like Shell that bear the historic responsibilities for this loss and damage. The climate justice clock is ticking and polluters must stop developing new fossil fuel projects and pay for the decades of devastation they have caused around the world.”

Will energy and fuel prices go back to their pre-Covid levels?

Gas prices are unlikely to drop back to what we used to consider “normal” prices.

The dispute between Russia and Europe is now so big that it seems unlikely that the gas will start flowing like it used to, even in the unlikely event that hostilities cease in Ukraine.

That will leave Europe reliant on liquid natural gas imports for years to come – until it can replace gas with renewable energy.

To make it liquid so it can be transported by ship, natural gas is cooled to -160C. This is an expensive process in its own right, so adds to the price that people have to pay for LNG, compared to gas transported by pipeline.

Therefore, as long as Europe is more reliant on LNG than it has been in the past, gas bills are likely to remain higher.

As for the price of fuel, diesel and petrol prices are falling, according to data from the RAC, although they still have some way to go before coming back to more normal levels.