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Record fossil fuel profits raise calls for higher windfall taxes on Big Oil
Faced with record profits by BP and other fossil fuel majors, there are increasing calls for a rise in windfall taxes by hard-hit consumers, environmentalists and trade unions.
Together with ExxonMobil, Chevron, Shell and ConocoPhillips, the five companies saw sales climb well over $1tn last year, as Russia’s war on Ukraine hindered efforts at post-pandemic recovery, driving up oil and gas prices to record highs.
Record-breaking figures were announced by BP this week with $27.7bn profit in 2022. Shell had earlier reported a nearly $40bn profit for last year, the most money it had ever made in 115 years. Chevron doubled profits to $36.5bn in 2022, while ConocoPhillips doubled its refining profits to $18.7bn. Leading the pack, ExxonMobil announced record profits of $56bn for last year.
Environmentalists, trade unions, UK government opposition and even the US White House expressed loud condemnation of the unprecedented profits.
In the US, the White House criticised fossil fuel companies for not increasing production to help bring down gas prices, and last year floated the idea of putting a tax on oil and gas profits. But no action has been taken so far.
According to a BBC report, a White House spokesperson called ExxonMobil’s profit ‘outrageous’ and blasted Chevron’s announcement that it would spend $75bn on buying back stock from investors. The spokesperson said: ‘A windfall tax on oil and gas profits is needed more than ever to free up money that’s desperately needed to help those struggling with the cost of energy, as economies around the world face recesses.’
The European Union (EU) and UK have already imposed windfall taxes on surplus energy company profits, aiming to limit some of the impact of citizen’s skyrocketing energy costs. A temporary windfall tax was approved by the EU in September 2022 to curb surplus profits made by fossil fuel companies in 2022 and 2023.
ExxonMobil claimed it took a $1.3bn hit on its earnings due to the European windfall tax from October to December 2022. The company’s Chief Financial Officer Kathryn Mikells argued that the windfall profit taxes are ‘unlawful and bad policy’ and have ‘the opposite effect on what you are trying to achieve’. She added that it would ‘discourage investments, undermine investor confidence and make Europe less competitive’.
In its latest financial statement, BP said it had paid £1.5bn in windfall taxes, as it recorded a profit of $27.7bn compared with $12.8bn the previous year. As well as extending share buybacks to $2.75bn, it increased its dividend by 10%.
Neil Shah, Executive Director of Content and Strategy at the Edison Group commented: ‘The extraordinary scale of these earnings will undoubtedly once more raise the question of how governments round the world look to tax Big Oil.’
Others put it even more strongly.
Commenting on BP’s results, TUC General Secretary Paul Nowak said: ‘As millions struggle to heat their homes and put food on the table, BP are laughing all the way to the bank. Hard-pressed families will rightly feel furious – they are being treated like cash machines…. Ministers are letting Big Oil and gas companies pocket billions in excess profits …’ He called for the UK government to impose a higher windfall tax on the likes of BP and Shell.
Indeed, UK Prime Minister Rishi Sunak is coming under increased pressure to raise the windfall tax.
Opposition parties and trade unions had described Shell’s ‘bonanza’ profits as ‘outrageous’ too. According to The Guardian, Shell had paid just $134mn in UK windfall taxes in 2022 and $520mn under the EU ‘solidarity-contribution’, Europe’s equivalent of the windfall tax. Shell said it was likely to contribute around $500mn in 2023.
UK Shadow Climate Change Secretary Ed Milliband argued: ‘As the British people face an energy price hike of 40% in April , the government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.’
Historically, Sunak had introduced a 25% Energy Profits Levy when he was Chancellor, and current Chancellor Jeremy Hunt announced in his Autumn Statement moves to increase the levy to 35% from January 2023, to stay in place until March 2028.