Shell and BP profits set to soar amid threat of windfall tax

The British government is being urged to levy a new tax on the profits of oil firms

Shell and BP are expected to announce bumper payouts for shareholders this week. EPA
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Energy companies Shell and BP have faced calls to pay more tax after they announced bumper payouts to shareholders.

The oil companies are predicted to report a combined £10.5 billion ($12.57 billion) in profit from the first three months of the financial year, far more than from the same period in 2021.

A lot of this will come from the cash that households pay to keep the lights on, heat their homes and fill up their cars.

Rishi Sunak, Britain's Chancellor of the Exchequer, hinted last week he would be prepared to introduce a windfall tax on energy companies that did not reinvest profits into the North Sea and clean energy projects. He had previously rejected such a policy.

The payouts are expected to prompt calls from opposition MPs for a windfall tax.

The UK government has been urged to make energy companies cough up more tax to ease the cost of living crisis for Britons.  EPA

Shell expects to report adjusted earnings of £7 billion, according to a company-compiled consensus of analyst estimates.

BP is forecast to report £3.6bn in replacement cost profit.

While the war in Ukraine has caused the prices of oil and gas to rise, it has also resulted in significant costs for energy firms.

Last month, Shell increased its estimated costs of exiting Russia from £2.7bn to between £4bn and £5bn.

BP will report its results on Tuesday and Shell on Thursday.

On Sunday, the UK Business Secretary, Kwasi Kwarteng, suggested there was a split in opinion in the Cabinet when it came to a windfall tax on oil and gas companies.

“I’ve never been a supporter of windfall taxes — I’ve been very clear about that publicly. I think they discourage investment,” Mr Kwarteng told Sky News.

Sir Keir Starmer, the Labour leader, called for a £600 reduction in energy bills funded by a one-off tax on oil and gas profits to help the poorest households.

“We are not talking about taxing the profits they expected to make. This is the profits they didn’t expect to make,” he told Sky News. “We would then use that to reduce energy bills by up to £600 by those who need it, directly using that for the energy bills.

“I tell you this — £600 help with energy bills for those that need it will be desperately needed and welcomed across the country.”

Mr Starmer said the cost of living had been the “number one issue” on the doorstep while campaigning for the local elections. He said the Conservatives had said “absolutely nothing” about it.

On Thursday local elections will be held for some local authorities in England, including those in London, Leeds, Manchester and Birmingham. All 32 councils in Scotland and all 22 in Wales will also hold ballots. In Northern Ireland, voters will go to the polls across 18 constituencies to elect 90 MLAs.

Updated: May 05, 2022, 7:30 AM