Criticism arises as BP reports £4 billion in profits over the course of three months

BP, the multinational oil and gas corporation, has announced a robust financial performance for the beginning of the year, benefiting from high energy prices. In the first quarter of the year, the company generated $5 billion (£4 billion) in profits, although this represents a decrease from the $6.2 billion earned during the same period last year due to falling oil prices following Russia’s incursion into Ukraine.

As energy companies continue to reap large profits, there have been demands for them to contribute more to taxation to relieve the financial burden faced by households.

The Labour and Liberal Democrat parties have proposed a windfall tax to address the issue. Sir Keir Starmer, leader of the Labour Party, has called for a “proper” windfall tax to be imposed on energy profits.

“Of course we want BP and others to make profits so they can invest but these are profits that they didn’t expect to make, these are profits that are over and above because the world price of energy is so high,” he told BBC Breakfast.

Liberal Democrat leader Ed Davey said: “These eye-watering profits are a kick in the teeth for all those struggling to pay their energy bills.”

He added that the government had “let oil and gas giants off the hook for billions of pounds while people and businesses struggle to pay for their gas and electricity”.

BP, like many others in the energy industry, has experienced a surge in profits due to high oil and gas prices following the Ukraine crisis. Last year, the company recorded record annual profits, but energy prices have caused many households and businesses to face high bills.

Despite this, BP reported a strong performance in the first quarter of this year, with CEO Bernard Looney calling it “strong.” The company attributes this to “exceptional” gas marketing and trading, as well as “very strong” oil trading.

Former BP executive and visiting professor at Kings College London, Nick Butler, attributes the company’s strong results to both internal business performance and high global prices. However, he predicts that BP’s profits will fall significantly this year due to falling oil and gas prices.

The UK government implemented a windfall tax called the Energy Profits Levy (EPL) last year to tax profits from extracting UK oil and gas. The EPL is set at 35%, bringing the total tax rate for oil and gas companies to 75%. However, companies can lower the tax amount by deducting losses or investment in their UK oil and gas business. Most of BP’s profits are earned outside the UK and are not covered by the EPL.

BP paid $3.4bn in global tax and $650m in UK tax, with around $300m for the EPL in the first quarter of 2023. Since the introduction of the EPL, BP said it had paid an extra $1bn in tax.

Wholesale gas prices have dropped, and Brent crude oil prices have fallen to around $80 per barrel from $128 after Russia’s invasion of Ukraine. However, BP said oil and European gas prices would remain higher than usual from April to June.

The government’s Energy Price Guarantee, limiting energy bills for a typical household to £2,500 a year, will end in June. But experts believe bills will drop below this level in July due to falling wholesale costs, rendering the price guarantee useless.

Earlier this year, BP faced criticism for scaling back its emissions reduction targets by the end of the decade. At the company’s annual general meeting, some of the UK’s largest pension funds voted against the reappointment of BP’s chairman, Helge Lund, in protest of the decision.

BP responded that it values “constructive challenge and engagement.” Environmental pressure group Greenpeace’s Charlie Kronick stated in response to BP’s latest results that the government should step in and force BP and the oil industry to pay for the damage they cause to the climate and use the money to address the devastating climate impacts being experienced worldwide.