No Cost of Living Crisis for BP as Q1 Profits Announced
April saw food inflation hit 15.7%, but BP and its shareholders aren’t worried, having just revealed a $5 billion profit in the first quarter of 2023 alone. Between January and March, households across the UK suffered from inflation levels between 10.1% and 10.4%. According to data from The Trussell Trust, food bank use in the past year has dwarfed the need experienced during the pandemic, highlighting the disparity between the public and gas giants.
Even financial analysts hadn’t predicted BP’s profits to reach new heights this year, being $700 million more than expected. Shareholders have been rewarded with 6.6 cents per share dividend, up from the 5.4 cents share given in 2022. The oil and gas giant was quick to point out its successes from marketing and trading, a faster refinery process and success with oil.
Shell’s first quarter profits were also at an unexpected height of $9.6 billion, which was higher than their internal predictions of $8 billion. The company put an increase in profits down to cheaper oil and gas since the new year and higher taxes. Since both Shell and BP have outdone themselves and rewarded investors and pension funds alike, fresh calls have been made for proper windfall taxes.
In terms of the Energy Profits Levy, which is effectively the closest the current government has come to imposing a windfall tax, Shell is reported to have paid $134 million towards the levy in 2022. Despite this, and the way current energy rebates work, Shell only paid $8 million. The company itself said it expects to pay $500 million in windfall this year.
BP, on the other hand, paid $700 million towards the levy for North Sea operations last year. The first quarter of 2023 saw them pay $300 million. Despite Shell moving its head office from the Netherlands to the UK, the giant has sold off a lot of its North Sea developments, arguing that the UK only accounts for less than 5% of global revenues. So if Shell isn’t paying as much anymore for the levy, how much should BP be paying?
To put it into perspective, BP could pay their Energy Profits Levy contribution over 16 times with the profit that they made in the same time frame. Many people are calling on the government to stop handing energy firms rebates in their investments and to start putting a windfall tax directly on these profits. As the price of energy has only become cheaper, it’s hard not to accuse these oil and gas giants of profiteering.
In response, BP’s CEO, Bernard Looney, defended the amount of tax that they paid in 2022. According to him, “The largest amount of tax we paid in our history was paid in 2022. In the UK, for every £4 that we make in the North Sea, we pay £3 now in taxes, and we’re pretty much reinvesting all of the rest.” Where tax relief is available for up to 91.25p for every pound for reinvestment, it’s no wonder that Looney is quick to point out how much tax he’s paying and how much he’s reinvesting.