The British oil giant BP has posted a massive profit of $12.8 billion for 2021. Much of this came from over $4.1 billion earned in the final quarter of last year where the price of oil and gas spiked. However, there are concerns that BP’s staggering profits in the face of the rising cost of living could cause energy giants to be taxed more heavily.
BP isn’t the only energy company generating huge profits as a result of the rise in gas and oil prices. Last week saw another UK-based energy company, Shell, recording a yearly profit of $19 billion which was four-times higher than the previous year.
The US fuel industry has also been enjoying excellent profits in the past few months. Chevon reported a net profit of $15 billion while Exxon Mobile topped this to post a net profit of $23 billion. These are the highest profits the companies have seen since 2014.
The oil price has rallied to seven-year highs and it has been coupled with soaring prices in the global gas markets. This has meant that the BP CEO Bernard Looney is quite right when he described the energy giant as a ‘cash machine’.
All of which will be welcomed by the oil industry that was especially hard hit by falling demand during the pandemic. BP posted a net loss of $5.7 billion in 2020 and the rapid turnaround in fortunes has been reflected in the markets with the share price of BP rising by 0.8% during morning trading hours. The fossil fuel giant has enjoyed a 23% rise in its stock price in the year-to-date.
With the price of gas being five times more expensive and oil being twice as expensive as before the pandemic struck, analysts believe that both BP and Shell could record $40 billion profits this year. To record such profits at a time of such economic turmoil is an impressive story, but it remains to be seen whether such profits are sustainable.
Will the energy giants be taxed more?
While the profits will be welcome news for BP and Shell, there are growing calls for an increase in tax for these energy giants. This is because households are suffering from a staggering rise in their gas and electricity bills as a result of the increased cost of fossil fuels. Plus the ongoing concerns about the climate change crisis has also caused plenty of outrage about the profitability of oil giants like BP.
However, many of the fossil fuel companies are arguing against the introduction of a further windfall tax. This is because they fear that increased taxes would make it harder for them to make the transition to greener fuel supplies.
While such claims are admirable, it is worth noting that none of the world’s largest oil and gas firms have business models with climate targets satisfactory to the recent Paris Agreement on combating climate change.