The energy giant is benefitting from higher oil and gas prices which have pushed up bills for households.
Image source, Getty Images
Oil giant BP has reported its highest profit for eight years, amid calls for a windfall tax on energy companies.
BP posted a profit of $12.8bn (£9.5bn) for 2021, and it made more than $4bn in the final quarter of the year when oil and gas prices surged.
The jump in energy prices means households are facing huge increases in gas and electricity bills from April.
Labour said it was “only fair and right” that energy firms making higher profits should pay more tax.
Last week, rival oil giant Shell also reported bumper profits of $19bn on the same day that the energy regulator announced UK householders would see a 54% rise in their domestic energy bills in April.
Announcing BP’s latest results, chief executive Bernard Looney said: “2021 shows BP doing what we said we would – performing while transforming.”
He said the company was delivering for shareholders with $4.15bn of share buybacks and an increased dividend. BP had also made “strong progress” in its transformation towards becoming a low carbon energy business, he said.
Last year’s bumper profits follow a $5.6bn loss BP reported in 2020, when economies around the world were shut down due to the Covid pandemic.
But rising demand for oil last year, as economies reopened, combined with supply chain challenges, pushed energy prices sharply higher by the end of 2021. The surge in revenues prompted Mr Looney to describe BP as “a cash machine”.
UK households are facing a cost of living crisis, with prices for food and heating rising sharply. Last week’s announcement of a huge increase in the energy price cap prompted the government to step in with a council tax rebate and loans to smooth price rises.
The very same energy prices that have spelt crippling bills for users have prompted BP’s boss to describe his operation right now as a “cash machine”. A combination of resurgent demand and geopolitical tensions means wholesale gas prices are five times higher than before the pandemic – while oil prices have almost doubled.
And there’s more rewards to be reaped: analysts think BP and Shell could make almost £40bn in profits this year, enough to cover the energy bills of the majority of UK households, renewing calls for a windfall tax. But the chancellor is unconvinced, fearing that it could damage investment in lower carbon forms of energy, particularly given that energy giants’ profits, tied as they are to global prices, are very volatile.
BP’s plan to invest in renewables are among the most ambitious in the sector, with an aim to increase spending on low carbon technologies 10-fold, to almost a third of its budget in 10 years. And in the meantime, there are concerns that the UK needs to do more to ensure to boost its own gas supply; at present, more than half our demand is met by imports.
But critics say that BP’s renewables investment comes from a very low base, and could go further. Yet there could still be scope, given the scale of this windfall – to help foot the bill for help for struggling customers
Labour and the Liberal Democrats have both called for a windfall tax on the profits of the fossil fuel firms such as BP and Shell to fund more support for households.
“The boss of BP described the energy price crisis as a cash machine for his company – and the people supplying the cash are the British people through rocketing energy bills,” said Ed Miliband, Labour’s shadow secretary of state for climate and net zero.
“In these circumstances, it is only fair and right for oil and gas producers to contribute to helping the millions of families facing soaring inflation and a cost of living crisis.”
Under a plan outlined by Labour last month, North Sea energy producers would pay higher corporation tax for a year to fund £1.2bn of help for households.
Liberal Democrat Leader Ed Davey said: “It simply cannot be right these energy companies are making super profits whilst people are too scared to turn their radiators on and terrified there will be a cold snap.
“A windfall tax is the best way to get money to the people who need it quickly, but also to make sure there is some sense of trust and proportionality in the system.”