Sunak should reconsider oil and gas windfall tax after BP’s £10bn year
A cash machine. That was how Bernard Looney, the chief executive of BP, described his company back in November following last year’s sharp rise in global oil and gas prices. And the size of the company’s bank balance has now duly been revealed: profits just shy of £10bn last year – the highest in eight years.
Clearly, these are windfall gains. BP had not expected a fivefold increase in the wholesale price of gas during 2012. Nor did it forecast that the cost of crude oil would currently be nudging its way towards $100 a barrel.
Unsurprisingly, therefore, there have been calls for the government to make a sizable withdrawal from the cash machine in the form of a windfall tax. Rachel Reeves, the shadow chancellor, was quick to repeat Labour’s call for a one-off increase in corporation tax on North Sea producers to fund lower bills for consumers.
Hang on a bit, BP and the other energy companies say. High prices now are simply the corollary of rock-bottom prices during the depths of the pandemic, a period when crude prices briefly dipped below zero. What’s more, the government has been urging energy companies, such as BP, to invest more in renewables in order to speed up the UK’s transition to a net zero carbon economy. Ministers can either have a short-term, and partial, fix to Britain’s cost of living crisis or they can have a long-term solution to future energy needs. They can’t have both.
Actually, they can. BP set out its plans to increase investment in renewables tenfold (from a low base) before it reaped windfall gains from rising fossil fuel prices. The fact that the company has earmarked more than £1bn for share buybacks – which boost the company’s share price – suggests BP would have no trouble sticking to its
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