BP profits soar as calls for windfall tax grow

BP’s profits for the first three months of this year have more than doubled after oil and gas prices soared.

The energy giant reported an underlying profit of $6.2bn (£4.9bn) compared to $2.6bn in the same period last year – ahead of expectations.

BP said the increase was due in part to “exceptional oil and gas trading”.

Rising profits have prompted calls for a one-off windfall tax on energy companies to help UK households grappling with rising bills.

UK inflation is currently at its highest rate for 30 years, lifted by the rising cost of oil and gas which has inflated fuel prices as well as the cost of household energy.

Labour leader Sir Keir Starmer told the BBC that BP’s profits – which beat analyst expectations of $4.49bn – “reinforce the case that we’ve been making which is that, with so many people struggling to pay their energy bills, we should have a windfall tax on oil and gas companies in the North Sea who have made more profit than they were expecting”.

But Prime Minister Boris Johnson said a windfall tax would hamper investment and keep oil prices higher over the long term.

He told ITV: “If you put a windfall tax on the energy companies, what that means is that you discourage them from making the investments that we want to see that will, in the end, keep energy prices lower for everybody.”

Liberal Democrat leader Ed Davey said energy companies should “pay a little more to help the most vulnerable”.

“The Conservative government’s refusal to introduce a windfall tax on the super profits of oil companies is becoming impossible to justify,” he said. “BP is raking in eye-watering profits while millions of people struggle to pay the bills.”

Chancellor Rishi Sunak has previously said he would explore a windfall tax policy if companies did not invest enough in the UK’s energy supply.

On Tuesday, BP announced plans to invest £18bn in green and fossil fuel operations in the UK by the end of the decade.

Russ Mould, investment director at AJ Bell said it was “no surprise” to hear BP pledging billions of pounds worth of investment in projects to boost domestic energy security.

“Whether this will be enough to stave off a new levy remains to be seen. The political pressure to do so is only likely to escalate as the cost of living continues to surge in the UK,” he said.

BP also outlined that it had taken a $24.4bn hit on its decision to exit its shareholding in Russian energy giant Rosneft following the Kremlin’s assault on Ukraine.

Including the cost of exiting its 19.75% shareholding in Rosneft, BP reported a loss of $20.3bn for the first quarter.

“In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP’s focus has been on supplying the reliable energy our customers need,” said BP’s chief executive Bernard Looney.

Mr Looney said the oil market will continue to be volatile and he does not expect “any let off on prices any time soon”.

BP’s profits have been driven by a sharp rise in oil prices, initially led by increased demand as economies reopened following Covid lockdowns. Last November, Mr Looney described the energy market as “a cash machine”.

Oil prices rose further after war broke out in Ukraine and western countries imposed sanctions on Russia following its invasion. Russia is the second biggest exporter of crude oil, and is also the world’s largest natural gas exporter.

BP will buy back another US $2.5 billion in shares, and further reduce its net debt.