LONDON, May 4 (NNN-AGENCIES) – Oil giant BP, reported yesterday that, its underlying profit for the first quarter of this year saw a huge increase to 6.2 billion U.S. dollars, fueling discussions about a windfall tax on energy companies.
The company’s profit was 2.6 billion dollars during the first three months of 2021, and 4.1 billion in the fourth quarter of last year. BP said, this year’s increase was driven by exceptional oil and gas trading, higher oil realisations and a stronger refining result.
Also yesterday, BP announced that, it intends to invest up to 18 billion pounds in Britain’s energy system, by the end of 2030, and to continue investing in North Sea oil and gas. The energy giant also anticipates paying up to one billion pounds in taxes, for its 2022 North Sea profits.
BP’s bumper earnings came, alongside an ongoing argument in Britain, over whether a one-off tax should be levied by the government on North Sea oil and gas companies, which have enjoyed a bonanza, due to surging energy prices.
“With oil and gas prices at elevated levels, and energy companies enjoying an unexpected windfall, in terms of higher profits, politicians have been responding to populist pressure, to impose windfall taxes, to help ease the rising cost of living,” said Michael Hewson of the London-based financial services company, CMC Markets.
However, BP has rejected the idea, saying earlier this year that, a windfall tax on British oil and gas producers would not encourage investment in the country’s gas resources.
Meanwhile, the government has sent mixed signals; while Chancellor of the Exchequer, Rishi Sunak said last week that, a levy was not off the table, Prime Minister, Boris Johnson, said yesterday that, taxing energy companies would discourage them from making investments.
With raging inflation and a sky-rocketing cost of living in the country, discussions over how to resolve these issues have been central to the government’s agenda. Britain’s Consumer Price Index rose by seven percent in March, hitting a new 30-year high. It is expected to surge further, mainly due to a much higher energy price cap since Apr.
“BP’s first quarter results will do nothing to quell talk of a windfall tax on oil and gas companies,” said Russ Mould, investment director with the British online investment platform, AJ Bell.
Noting BP’s plans to invest in projects, to boost Britain’s energy security, Mould said, “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.”– NNN-AGENCIES