Calls mount for windfall tax after BP posts highest annual profit in eight years

Oil giant BP has posted its highest annual profit in eight years, prompting renewed calls for a windfall tax on fossil fuel firms to help households facing a cost-of-living crisis.

The group revealed that it swung to a mammoth 12.8 billion US dollar (£9.5 billion) underlying profit in 2021 from losses of 5.7 billion US dollars (£4.2 billion) the previous year thanks to rebounding oil and gas prices.

It notched up 4.07 billion US dollars (£3.01 billion) of profits in the final three months alone, which was better than expected and up from just 115 million US dollars (£85.1 million) a year earlier.

BP also announced more returns for shareholders, with another 1.5 billion US dollars (£1.1 billion) of share buybacks before its first-quarter 2022 results and a dividend payout of 5.46 cents (3.37p) a share for the fourth quarter.

The results have intensified pressure on oil firms as they reap mammoth profit hauls while households and businesses are struggling due to soaring inflation.

Calls are growing for a windfall tax on energy giants, with Labour and Liberal Democrat MPs arguing that while households are being hit with sky-high energy bills, the companies which extract that gas are reporting massive profits.

Supporters of the tax believe some of this money should be reclaimed to help struggling households, but Chancellor Rishi Sunak has so far rejected the proposals.

Shell was in the firing line last week as it reported a hefty spike in profits on the same day that Ofgem announced a near £700 rise in the energy price cap.

Ed Miliband, shadow secretary of state for climate and net zero, said: “The boss of BP described the energy price crisis as a cash machine for his company, and the people supplying the cash are the British people through rocketing energy bills.

“In these circumstances, it is only fair and right for oil and gas producers to make an additional contribution to helping the millions of families facing a true financial crisis.”

“A windfall tax is the best way to get money to the people who need it quickly, but also to make sure there is some sense of trust and proportionality in the system.”

Greenpeace branded BP’s 2021 profits as a “slap in the face to the millions of people dreading their next energy bill”.

BP insisted that it is heavily investing the profits it makes back into shifting to lower carbon alternatives to fossil fuels as it announced plans alongside its results to boost investment in renewable energy.

For every £1 it earns in the UK, it has committed to spend £2 out to at least 2025, according to the group.

Chief executive Bernard Looney told CNBC a windfall tax would not address the current crisis.

He said: “We need more gas, not less gas, and therefore we need to encourage investment into the North Sea and not discourage it.”

“The second thing is around the transition – we need to accelerate the transition,” he added.

BP’s results showed a marked recovery from a torrid 2020, when the pandemic sent it slumping 18.1 billion US dollars (£13.4 billion) into the red on a statutory basis – its biggest ever annual loss.

Oil and gas prices have since rebounded as economies worldwide reopened following the early stages of the Covid crisis, with a demand crunch pushing the cost of crude past 90 US dollars a barrel for the first time in more than seven years.