(qlmbusinessnews.com via theguardian.com – – Thur, 2nd Feb 2023) London, Uk – –
Sunak government under pressure after gas prices fuel ‘outrageous’ doubling of profits at Anglo-Dutch group
The government is under pressure to rethink its windfall tax on energy companies after Shell reported one of the largest profits in UK corporate history, with the surge in energy prices sparked by Russia’s invasion of Ukraine pushing the oil company’s annual takings to $40bn (£32bn).
Opposition parties and trade unions described Shell’s bonanza, the biggest in its 115 year history, as “outrageous” and accused Rishi Sunak of letting fossil fuel companies “off the hook”.
On Thursday, the UK headquartered company confirmed it had paid just $134m in British windfall taxes during 2022. It paid $520m under the EU “solidarity contribution” – Europe’s equivalent of the windfall tax.
The company was criticised in October when it said it had paid no UK windfall tax up to that point, but on Wednesday said it was likely to contribute $500m in 2023.
Boosted by record oil and gas prices, Shell posted profits of almost $10bn in the final quarter of last year, taking its annual adjusted profits to $40bn in 2022, far outstripping the $19bn notched up in 2021.
The performance puts Shell on a par with the £38bn British American Tobacco made in 2017, but still behind the £60bn Vodaphone achieved in 2014, when the telecoms group sold its US business.
The shadow climate change secretary, Ed Miliband, said: “As the British people face an energy price hike of 40% in April, the government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.”
Miliband added: “Labour would stop the energy price cap going up in April, because it is only right that the companies making unexpected windfall profits from the proceeds of war pay their fair share.”
The Liberal Democrat leader, Ed Davey, said: “No company should be making these kind of outrageous profits out of [Vladimir] Putin’s illegal invasion of Ukraine.
“Rishi Sunak was warned as chancellor and now as prime minister that we need a proper windfall tax on companies like Shell and he has failed to take action.”
Paul Nowak, the general secretary of the TUC, said the profits were “obscene” and “an insult to working families”.
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The step up in Shell and its competitors’ profits during 2022 prompted the government to introduce a windfall tax on North Sea operators, which was later toughened by the chancellor, Jeremy Hunt.
Nowak said windfall taxes should be increased. “As households up and down Britain struggle to pay their bills and make ends meet, Shell are enjoying a cash bonanza. The time for excuses is over. The government must impose a larger windfall tax on energy companies. Billions are being left on the table,” he said.
“Instead of holding down the pay of paramedics, teachers, firefighters and millions of other hard-pressed public servants, ministers should be making big 0il and gas pay their fair share.”
Shell has benefited from a surge in oil prices caused by embargoes on Russian oil imposed since the invasion of Ukraine, and Russia’s decision to cut off gas supplies to continental Europe.
Analysts had expected Shell’s new chief executive, Wael Sawan, to report adjusted earnings of $7.97bn for the fourth quarter and $38.17bn for the year, in his City debut. It represented an increase on the $9.45bn registered in the third quarter, aided by a bounceback in earnings from its liquefied natural gas trading arm.
Sunak’s official spokesperson said No 10 was aware the public would view Shell’s profits as “extraordinary” high, which was why the government had introduced its windfall tax comparable to those seen in other countries, he added.
“We think it [the profits levy] strikes a balance between funding cost of living support while encouraging investment in order to bolster the UK’s energy security,” they said. “We have made it clear that we want to encourage reinvestment of the sector’s profits to support the economy, jobs and energy security, and that’s why the more investment a firm makes into the UK the less tax they will pay.”
Sawan announced a boost in payouts to shareholders, with a 15% increase in the final quarter dividend to $6.3bn.
He also announced $4bn of share buybacks over the next three months. In total, Shell distributed $26bn to shareholders in 2022.
Asked how it felt to make huge profits while people struggle with their bills, Sawan said: “These are incredibly difficult times, we’re seeing inflation rampant around the world … When I go back home to Lebanon some of the challenges I see people going through, sometimes without electricity for a full day, are the the challenges that we see in many, many parts of the world. The answer to that is to make sure we provide energy to the world.”
Shell has also been accused of overstating how much it is spending on renewable energy, and faced calls this week to be investigated and potentially fined by the US financial regulator.
Shell invested $25bn overall during 2022, up from $20bn in 2021. The firm spent $12bn on oil and gas projects, compared with $3.5bn on its renewable energy division.
The Greenpeace UK senior climate justice campaigner Elena Polisano said: “World leaders have just set up a new fund to pay for the loss and damage caused by the climate crisis. Now they should force historical mega-polluters like Shell to pay into it.”
Jonathan Noronha-Gant, a senior campaigner at Global Witness, said: “People have every right to be outraged at the enormous profits that Shell has made in the midst of an energy affordability crisis that has pushed millions of families into poverty.”
The company, which has a stock market valuation of $165bn, last week embarked on a review of its division supplying energy and broadband to homes in Europe, putting 2,000 UK jobs at risk.