BP under windfall tax pressure after posting eight-year high profits

BP today revealed an annual profit return of almost US$13 billion for 2021, but faces continuing calls from UK politicians for a windfall tax on fossil fuel producers as consumer energy bills are set to rise by an average 54% in April.

The oil giant said that underlying profits hit $12.8 billion last year on a replacement cost basis – the highest level since 2013. BP will maintain its dividend and buy back $1.5 billion of shares in the first quarter of 2022.

The UK company and its peers – including Royal Dutch Shell, which reported 2021 earnings of $19.3 billion last week, have benefitted from a global energy crunch that has pushed oil prices above $90 for the first time in more than seven years.

However, the strong results have led to a raft of politicians calling for a windfall tax to cushion the imminent energy price hike on households in the UK. Shadow chancellor Rachel Reeves said on Twitter: “It’s time for Labour’s plan for a one-off windfall tax on oil & gas producers to cut bills.”

While a windfall tax is an unlikely outcome, according to Edison Group’s director of research Neil Shah, BP has been making concerted efforts “to prepare for a net zero future, with significant operations in the hydrocarbon, hydrogen and offshore wind sectors,” he said.

BP is currently undergoing a huge corporate overhaul in preparation for the clean energy transition. It is aiming to build, buy or receive approval for 25GW of renewable power by 2025 and 50GW by 2030.

Since 2019, the firm has quadrupled its renewables development pipeline from 6GW to 24.5GW. To achieve its 2025 target it must achieve a further doubling of its renewables pipeline.