Energy major soars on higher oil price
Chief says levy would dent green push
BP’s chief executive hit back at fresh
calls for a windfall tax on profits to help
struggling households yesterday after
the oil company recorded its highest
profit in eight years, warning that it
would deter investment and delay Britain’s net zero ambitions.
Bernard Looney said that an extra tax
on profits in the UK would divert revenues away from projects to boost gas
supply and make more low-carbon
energy. “I don’t think a windfall tax is
going to incentivise people to invest in
the thing that we need right now,” he
told the Financial Times.
Looney said that BP would continue
to invest in its natural gas business and
increase spending on renewable energy
to 40 per cent of total expenditure by
2025.
His comments came after BP’s profits
hit $12.8bn last year, their highest level
since 2013, thanks to surging oil and gas
prices. It maintained its dividend and
committed to buying back $1.5bn of
shares in the first quarter of 2022.
BP is in the midst of a strategic overhaul, having committed to cut oil and
gas production by 40 per cent by 2030
and produce an extra 50GW of renewable power. But for now, profits are still
driven by its fossil fuel business and in
the past year, like the rest of the industry, it has benefited from a supply
crunch that has pushed oil prices above
$90 for the first time in more than seven
years and sent gas prices to record highs.
The British government ruled out increasing taxes for oil and gas companies last week, but opposition politicians responded to BP’s results with
renewed calls for a windfall tax.
Ed Davey, leader of the Liberal Democrats, told the BBC: “It just cannot be
right that these energy companies are
making super profits without . . . an
extra tax while people out there are too
scared to turn their radiators on.”
Rival Shell last week reported earnings of $19.3bn for 2021, driven by
bumper profits from its gas business. US
competitors ExxonMobil and Chevron
have also been boosted by higher prices.
BP’s performance is a stark improvement from 2020 when it recorded a
$5.7bn loss — its first annual loss in a
decade — after the pandemic hit oil
demand and it wrote down the value of
billions of dollars of assets.
BP’s earnings for the last three
months of 2021 were $4.1bn, beating
average analyst estimates of $3.9bn.
That compares with $100mn in the final
three months of 2020.
Looney stressed that oil and gas companies do not set the price of fuel, adding that when oil demand collapsed in
2020, BP made the largest loss in its 112-
year history.
“We make more money when prices
are high . . . we also make less money
when prices are low,” he said.
The group’s share price fell to a 25-
year low during 2020, days after Looney
presented investors with his strategy to
overhaul the company by increasing
low-carbon investment and cutting oil
and gas production.
But shares in BP have risen 24 per
cent this year. Oswald Clint, an analyst
at Bernstein, said there was a “spring in
the step of this new organisation”.
BP also pledged to cut emissions from
its operations by 50 per cent by 2030, up
from a previous target of a 30-35 per
cent reduction.