By Michael Race, Business reporter, BBC News
BP has reported its biggest quarterly profit for 14 years after oil and gas prices soared. The energy giant saw underlying profits hit $8.45bn (£6.9bn) between April and June – more than triple the amount it made in the same period last year.
It comes as typical household energy bills have been forecast to hit more than £3,600 a year this winter. The bumper profits have prompted calls for the government to tax firms further to help families with rising bills.
BP’s profits were the second highest for the second quarter in the firm’s history and follow record profits from rival Shell and huge earnings from British Gas owner Centrica last week.
Dale Vince, the founder of energy supplier Ecotricity said BP was “holding a shedload of money that is coming from hard-pressed bill-payers in our country”, adding he believed it was time to increase taxation on the profits of oil and gas companies.
“Clearly there are exceptional windfall profits in the oil and gas sector, and clearly there’s a problem in the energy market, and we should fix one with the other,” he told the BBC’s Today programme.
Campaign groups Greenpeace and Friends of the Earth as well as Labour and the Liberal Democrats also called for a tougher windfall tax on oil and gas firm profits.
The government has introduced a package of measures to help people with energy bills, such as a £400 discount, and following political pressure, ministers announced in May that oil and gas firms would pay an extra 25% on profits made in the UK profits.
However, as the legalisation – known as a windfall tax – wasn’t formally introduced until July, the tax does not apply to profits announced by BP and other energy firms between April and June.
The tax also only applies to profit made in the UK, which for most oil and gas companies is a small part of their operations. For BP, it accounts for a tenth of overall oil and gas production.
The Treasury said it did not comment on “individual taxpayers”, but added it expected the windfall tax, called the Energy Profits Levy, to raise about £5bn in its first year.
What’s driving up profits?
The huge increase in profits for firms has been fuelled by higher prices for oil and gas, which have risen sharply due to the war in Ukraine.
In recent months, Russia has reduced supplies to Europe following the invasion and fears are growing it may switch off the taps altogether.
The potential of gas supply problems have led to the wholesale price soaring, which has led to energy firms passing those costs onto customers – pushing up household energy bills by unprecedented amounts.
Higher oil prices have also led to the price of petrol and diesel reaching record highs at the pumps in recent months, although prices have started to fall slightly.
Dr Craig Lowrey, principal consultant at Cornwall Insight, told the BBC’s Today programme that energy bills “at this point in time” looked set to stay high across 2023 and into 2024 and warned higher bills was “a long-term problem for households.”
He said current government help would make a “dent” in higher bills but was “not going to offset this.”
‘Cash machine’
BP said following its bumper profit results that it would boost shareholder payouts by 10% as well as buy back shares as a result of its higher earnings.
Last year, chief executive Bernard Looney described the energy market as “a cash machine”.
But on Tuesday he said the company’s staff had helped to solve an “energy trilemma” which he added was “secure, affordable and lower carbon energy”.
“We do this by providing the oil and gas the world needs today – while at the same time, investing to accelerate the energy transition,” he added.
BP said strong refining margins and oil trading helped it boost its profits.
However, the company’s half-year figures were affected by a massive £19.9bn hit from its move to ditch the its near-20% stake in Russian oil producer Rosneft in response to the Ukraine war.
Richard Hunter, head of markets at online investment firm Interactive Investor, said BP had “already made some strong progress” in recouping the financial pain of its Russian exit, adding BP’s latest results were an “early indication of the company’s ability to repair such damage”.
