>Oil and gas firms also pay 30% corporation tax on their profits as well as a supplementary 10% rate. Along with the new windfall tax, that takes their total tax rate to 75%.
> BP said its UK business, which accounts for less than 10% of its global profits, will pay $2.2bn in tax for 2022, including $700m due to the Energy Profits Levy.
I am not sure you can tell a company to pay 75% of it's profits from other countries in tax. If that other country expects just 30%, that is a 105% tax rate...
> I am not sure you can tell a company to pay 75% of it's profits from other countries in tax.
Of course you can. Some countries even make their citizens pay tax on global earnings even when they dont live, work, vote or visit their country (looking at you USA)
> If that other country expects just 30%, that is a 105% tax rate...
Double taxation agreements exist. Where they dont the tax paid would be a cost .. so 75% of the after tax amount from the other country - i.e 82.5%
A Double taxation agreement means one or both country agrees to forgo some or all the tax they would otherwise demand. That's why the US technically taxes it's citizens working abroad, but in reality collects much less than the official rate. So if we do that for companies, then you are definitely not going to get 75% in the UK and 30% locally...
As commentators point out, they've been very busy shifting money to reduce their tax bill. Also, 30 + 10 + 25 != 75, so I don't know why the BBC keep repeating this number.
within the levy, a new ‘super-deduction’ style relief is being introduced to encourage firms to invest in oil and gas extraction in the UK. The new 80% Investment Allowance will mean businesses will overall get a 91p tax saving for every £1 they invest – providing them with an additional, immediate incentive to invest. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax they will pay.
Paying the windfall tax means that they had ~£0 of actual "investment" in the UK.
I didn't even know that! What still stuns me is the absolute genius in applying this to renewable energy suppliers, too. A Conservative government states its belief that low tax encourages investment so they... increase taxes on renewable providers.
Well ... my energy supplier - 100% green electricity saw fit to 5x my electricity bill. Wind / solar installed in say 2016 and expected yield X or pay-down the capital investment in Y years have seen massive windfalls and capital effective paid off thanks to the increase in prices.
If anything the tax / investment rebate should tax the finished and sold projects who have had massive windfalls while not impacting the companies or projects that are still investing.
I think there’s also a separate issue with energy prices set at the most expensive one. Honestly, I’m not sure why this is still the case in this climate.
It's not that stupid (and the EU even did the same thing first ... it's just that most of the British media reporting on how much more effective their windfall taxes were downplayed or omitted the fat that most of the money was coming from renewable generation). If the UK ever builds the kind of renewable capacity needed for our climate goals those windfall profits will go pop because they only exist due to electricity prices being based on the most expensive generation needed to meet demand, which is currently natural gas. Once renewables are pushing gas out of the generation mix most of the time that price drops to nearly zero except when the renewables aren't performing well. Basically, the only way for these profits to encourage investment is if renewable companies think they can sandbag the energy transition.
(The renewable generation that the Conservative government is pushing for isn't really affected by this because some time ago, they changed how the subsidies were structured into contracts for difference where the companies get a fixed price with the government paying back or receiving the difference from the market price. Profits from generation covered by those CfDs are not subject to any windfall tax.)
>Reported record annual profits after oil and gas prices surged last year following Russia's invasion of Ukraine.
I'm surprised by how short termed is the strategy to actually keep up with 'market' prices. (which they don't have to do, as their workforce and costs are basically staying the same, hence a hike in price increases profits)
They make higher profit now.
But how much demand destruction will happen in the long term ?
I myself just got an ebike to commute, which comes with a nearly 100% reduction in energy use. And I'm not alone.
There isn't any traffic jam anymore to commute to where I work, because remote working is becoming widespread (first because of covid, and now gas prices), so much fewer drivers are using their cars.
The local government has eventually passed laws to require landlords to properly thermally insulate homes (within a decade)
Trains were scheduled again, and became popular. I no longer hear about someone driving across the country. They would just get a train (which also comes with huge energy savings)
I'm surprised because the current hike isn't even fueling demand for EVs (as recharging your EV is now as expensive as getting a full tank in public spots)
Ppl are just shifting away from cars and some energy intensive usages, this time.
> I'm surprised by how short termed is the strategy to actually keep up with 'market' prices.
It's supply and demand in action. Each oil company has limited capacity of production and not much flexibility to increase it in short term. As part of the supply is no longer available, there is less oil available in the market. The market mechanism drives the price up to a level where supply and demand are in balance. So the migration of oil consumers to alternatives is exactly what's supposed to happen in this case.
Moreover, a single company does not have a real choice to sell for cheap. First everyone would choose this vendor for their oil needs. But as their stock and production is limited, they would soon run out of oil to sell. Even a cartel or government decision to lower the price does not cut it, because it kills the demand side incentive to find alternatives. Then you'd be in a situation where oil is cheap, but not available.
Yeah, it's just that people are unlikely to realise this because the British press has spent the last year or so lying about this for both partisan reasons (most of them hate the party currently in power) and environmentalist ones (there's been a huge campaign to block new fossil fuel production in order to fight global warming which relies on convincing people that the only reason governments haven't done so is because it'd hurt fossil fuel company profits - admitting that it'd actually increase their profits and make ordinary people worse off would get in the way of that).
That's curious as most of the British press fawn over the Tories and come up with excuses for their various failures. Even just recently, the Telegraph published Liz Truss' explanation of why her ideas weren't the problem with her failed premiership - she blames the left-wing economic establishment.
Also, it doesn't explain why the plan to help with elevated fuel prices involved borrowing money to pay the companies rather than trying to windfall tax them so that their profits aren't so excessive.
Actually, in a way it does. The idea that the reason the government's plan required borrowing so much money was because they'd refused to impose a proper windfall tax was a lie by the opposition Labour party (that was repeated unchallenged by most of the media, including the BBC): https://www.channel4.com/news/factcheck/factcheck-labour-kee... There's just not enough money there.
The actual reason that Labour's plan could be mostly funded from windfall taxes was much more cynical: it ended in April back when energy prices were expected to be even higher then, whilst the government plan extended for two years and cost substantially more as a result. This worked for Labour because the media was willing to ignore what this would actually mean for consumers - something they didn't do when the Government inevitably caved and did the same thing themselves. Of course, now that April is coming Rachel Reeves and other Labour politicians are claiming that the reason energy prices are going up is because the Tories refused to impose proper windfall taxes and of course Labour would keep the cap past then, and the BBC and others are repeating that claim unchallenged too.
The issue is more likely to do with the investment "loophole"
> Companies can reduce their payments if they invest capital in new production in the North Sea – covering everything from hiring vessels and rigs to engineering contracts.
The whole idea that this could all have been funded from a windfall tax pretty much came from Labour, which is how they're relevant. Also, the fact check I linked to specifically addressed the "investment loophole" - closing it's not even close to enough money. The claim that the price cap could be funded from windfall taxes really, heavily relied on Labour playing sneaky tricks with ending their proposed price cap in April and the media not calling them out on it (along with other dodgy accounting tricks, and more recently them pointing to Shell's global profits as proof the existing windfall tax isn't aggressive enough even though they only proposed to tax UK profits).
This is nothing to do with Labour; they haven't been in government for well over a decade.
The first UK windfall tax targeted on oil companies was in 1983 under Thatcher / Lord Lawson; so the party that recommends it depends more on what oil prices are doing rather than whether there is a left or right government in power.
Whether it will or won't cover all the costs doesn't really matter either, because everyone knows what the quality of economic forecasts are variable at best; you can't control an economy (no matter how much some Communist governments tried), but you can influence it with taxes / subsidies. What matters is the benefits and costs.
The main issue is that the UK economy is suffering under supply side inflation, and the usual tricks don't really work too well. The BoE have to be careful as during stagflation rate changes have larger than normal impacts; far more of a tightrope that usual. The UK has several supply side issues beyond other countries; no natural gas reserves (they were sold by the Tories / Osborne), and Brexit. And so the UK is in a tighter strait jacket; and the current results / forecasts for the GDP reflect that.
The UK business as a whole doesn't invest enough in capital goods (capital investment); compare UK's 18% of GDP to Germany 23%, France & Ireland 24%, even America with it's investment downturn in 2021 of 21%. And it's little wonder that the UK's productivity per capita is down.
This drop in investment leads to a drop in output which leads to a drop in tax revenue which leads to a drop in the currency (external/forex, internal/inflation). Brexit certainly hasn't helped at all on the investment front (either internal or FDI); plenty of UK businesses are investing in a presence in the EU so they can keep selling to EU customers (which leads to EU employment and EU taxes).
But cuts in services for the working class leads to a less productive working class (on top of the productivity hit from reduced capital investment), and real terms wage cuts leads to a real terms tax revenue cut as well (ceteris paribus; which it rarely is, the Tories want to tax the rich less which makes even less sense, the beatings will continue until morale improves!).
Stagflation is hard enough to navigate through without wearing ideological blinkers.
>a single company does not have a real choice to sell for cheap. First everyone would choose this vendor for their oil needs. But as their stock and production is limited, they would soon run out of oil to sell.
that's exactly a publicity stunt that made Total, in France, for a few weeks after their huge profits hit the news.
It turned out to be beneficial for them :
It improved their image among citizens. And they avoided that tax on extra profits, that BP will have to pay in the UK.
They even had news credit for this. After that stunt, they could go to the media and show everything they were 'doing' for industries, consumers, and investments against climate change.
Now the gas is back to expensive levels. But voters got gradually used to it, demand didn't break, and Total still dodged the tax and escaped more regulation.
BP used high oil prices to do stock buyback, Total used it to build their image as a 'socially responsible' and stable company.
(Btw, the shortage of fuel happened during strikes and other defiance on the government. So Total got away with being dry some of the time. The government somehow ended up being blamed for that.)
Now choose where you want to invest. It's fully up to your strategy.
Despite high fuel prices, it's still cheaper for me to drive from northern England to London (where my office is) than to get a train, even allowing for a nominal "maintenance" allowance for my car.
I don't do it because it is at best double the travel time, and at worst I've had the drive take 6x or more.
When I need to travel there with my wife and children I'll drive every time, because the train prices are just ridiculous.
I suppose it's a similar greed with our train operators with poor service and high prices, but it has almost always been this way in the UK since privatisation.
I use e-scooter rentals to get to and from the station now though; rentals because for some reason we're not allowed to own and ride them, we have to rent them; some catching up of our regulations to be had there.
Working from home though, I don't need to use any transport at all 5 days of the week, just need to deal with an energy bill more costly to keep warm than it would cost to travel to the office by train every day...
It wouldn't be cheaper to drive if your government properly taxed the petrol and road usage to help pay for and offset the environmental damage your transportation choice caused, would it?
It's daylight robbery, corruption would imply there's something shady going on here. This is how government services operate anywhere and everywhere in the world.
I think I understood that you live in the UK when I wrote my comment, idk how though.
I guess it seems crazy but to me those gas prices still sound cheap. Maybe I'm just an obnoxious environmentalist but I think gas taxes for private vehicles should simply be high enough to fund a carbon offset for the usage. I don't have numbers at hand but I'd imagine it'd be pretty high.
And yup thus in my dreams planes would basically be outrageously expensive to fly on. I guess for me the convenience trade-off is worth me being confident that my grandkids will have coral reefs to look at, which I'm basically 90% certain won't be the case for now.
It's a nation wide issue unfortunately. Since our rail was privatised the goal has (as is expected from a business) profit and not (as should be expected for a public service) utility.
Fuel prices aren't cheap here,though not the highest in Europe either, and ~50% is taxes, I'd hope some of that goes to good use for environmental efforts.
> And yup thus in my dreams planes would basically be outrageously expensive to fly on. I guess for me the convenience trade-off is worth me being confident that my grandkids will have coral reefs to look at, which I'm basically 90% certain won't be the case for now.
This is a difficult problem, form an environmental-only perspective that sounds reasonable, but to make it so that only the wealthy and elite can fly widens the class divide. I came from a working class family, but have traveled all over the world; that wouldn't have been possible if we simply priced ordinary people out of flying. Living in the UK, on an island, flying is one of the main ways out.
Rather, as an Engineer, I'd look to solve the problem with more efficient and sustainable technology, we should make the transport cause less harm, not price anybody but the wealthy out of it.
> Despite high fuel prices, it's still cheaper for me to drive from northern England to London (where my office is) than to get a train, even allowing for a nominal "maintenance" allowance for my car.
I can second how bad this situation is and how it's been bad for a long time.
In 2021, it was cheaper (half the price) for me to drive my fiancee and I to Liverpool and back than it was for just the train tickets. That's not even factoring in the extras like the transport to/from the train stations. In 2023, with trains becoming appallingly unreliable before the strikes, I can't blame anyone for decided to drive.
It's unfortunately clear that the current UK government has no interest in tackling the climate crisis or the long-term effects on the economy.
It's definitely not cheaper or more convenient for me to drive into Edinburgh from Fife - the train is pretty convenient and not too expensive (£15 return). But that's a relatively short journey.
Going down to the east coast mainline isn't too bad, the the west coast mainline is horrific and I try to avoid at all costs.
I don't mind flying but I hate airports and you often have to get a train at the other end anyway - don't think I'll ever travel on Southern again if I can possibly avoid it, they are actually worse that Avanti West Coast, which I didn't think was possible.
Yep £130 return to London from Glasgow or Edinburgh by car for four people. You might get less than £100 return on the train for one adult if you book 2 months ahead and don’t travel in the school holidays or when there’s a gig or a football match on. Last time I looked it was over £400 return for my family. You can’t tax cars to make them cost as much as transporting 4 people by train; that would strangle the economy. The government has to make running the trains more efficient and subsidise them properly. One glaring example; why is HS2 costing something like 5x more per km compared to French costs.
For HS2? No its not, even if you deduct the £8bn for land purchases it’s still way more expensive. Most expensive French line so far from Lyon Marseille was around €35m/km crossing the Haut Massif on 50 tunnels and bridges. Most recent Tours-Bordeaux was ~€23m/km. London Birmingham is costing something closer to €300m per km. I can’t be bothered to google the sources again and think about inflation but even with inflation and land prices I’m confident that it is costing at the very least 3 times more than it would in France maybe as much as 10x; something doesn’t stack up.
You're being downvoted for some reason but it's a valid point.
My answer is; yes and no.
I could still add the cost of annual service, tyres, brakes etc and still be cheaper to use the car, but the reality is, my family has a car because we need it otherwise, we live in the suburbs and have two kids who need to get places, so if I'm asked to travel to London and back tomorrow, it costs me ~£70 I wasn't expecting to spend today on fuel, or going by train would cost me anywhere between £200-400+ for the train, plus connecting transport; so add roughly half the cost of my fuel bill (~£30-35) for that.
The reality is, our trains are poor and overpriced have have been increasingly so since privatization. It also happen to be on the West-Coast Mainline, the operator of which is basically robbing us blind before they lose their contract due to poor performance.
I saw a chart showing cost vs carbon for different travel modes, trains had a huge cost to carbon ratio compared to cars, which are basically heavily subsidised. In the UK there's an idea that trains should be self sufficient (not that they are) but for some reasons cars get a free pass.
Just checking the wires ... BP unveils fourth share buyback of 2022 ... nahh that was last year ... ahh there it is ... BP profits surge to record $27bn, unveils $2.75bn share buyback.
I guess if your shareholders are buying a Tesla that is, indirectly, investing in EVs and batteries.
They are investing low billions in renewables and moving out of fossil fuels, but it's planned over decades.
The losses are not slowing Looney's spending on renewable energy. He aims to boost annual investment to $5 billion by 2030, a 10-fold increase over 2019.
The current proportions are illustrated in a graphic here:
> investing in renewables and moving out of fossil fuels
I would say diversifying into renewables, I see little sign that BP (or Shell or Saudi Arabia) are looking to not be in the fossil fuel industries.
Looking at these results, I am somewhat surprised that BP didn't get involved with buying out BritishVolt (although there was more than a hit of fraud / scamming there).
I would say they see legislation is on it's way, but now they can say, but if you hurt us, you'll hurt development in renewables! There is no way we should trust an industry tht's been lying to us for decades to sell us the solution while still being the problem.
It’s because the ruling class’ actual objective was arresting mobility and social interaction and potential for organizing.
It bothers me sometimes that people seem to simply ignore, tolerate, and make excuses for the abuses like some kind of abused wife.
While many people not only bend over backwards to curtail their life in a belief of salvation, the same ruling class that has psychologically abused a certain segment of the population into their new form of religion, jet around in private planes between several of their mansions and from one energy intensive event to another to discuss how the peasants should not be able to use energy As they pile the wealth of the working people who produce the value.
I wish more people had an understanding that we are sliding back into an aristocratic type system by way of a typical trap pattern. Being reliant on electricity and public transportation means you are totally dependent on and can be totally controlled by the ruling class. Have you exalted the virtues of your rulers sufficiently today, peasant? Maybe you do not get to charger your bike and definitely do not get to ride the public transportation system.
People are not shifting away from anything, they’re being herded into a trap and into a system of dependence, immobility, and control.
The cool thing about train tracks is that they're still there even after the cake has been eaten.
Your analysis is interesting but the material condition improvement of building public transit supersedes it, and furthermore, the existence of public transit doesn't prevent any form of revolution. Unless we all have jeeps and dirtbikes, the government can still stop movement by dropping bollards onto highways. Done.
So I don't think building public transit furthers the enslavement of the working class, rather the opposite, it's an example of us wrestling something we need from a bourgeois that really couldn't care less, cause as you say they'll just take a helicopter.
I ran out of battery more than once when testing the calibration of the battery gauge. And I could literally cycle back home.
I don't even used the electrical assistance on most of my trips. It's there, but you use it when you want.
It's better than a car, which dependent on fuel. Petrol has to be provided by what you call "the ruling class". (unless you dig yourself in the desert)
Also, politicians who wanted to get more powerful (like Thacher) used to just get rid of the public transportation and services.
Because of strikes.
As people are heavily reliant on the public transportation in here, strikes are a powerful political tool against the "aristocratic type system".
Lastly, I still have a car. I use it when I feel like using it, or to go on trips to burn a part of the money I saved after using a bike.
You describe persons who are dependent on cars.
But maybe this petrol-availability crisis can teach us to no longer be dependent on petrol. Cheap and easily available oil is over.
Oil is used everywhere. Everything today is made from plastic, or is wrapped in plastic. Also, as prosperity grows, so does tourism. Tourism = flights. EV trucks are far from ideal. So do EV pick-ups. Even when there'll a huge shift toward EVs, the world is going to need lots of oil in upcoming decades.
And honestly, I would be happier if BP shareholders get richer than Middle East sheiks, and Putin's friends.
> I would be happier if BP shareholders get richer than ..
Because things went so well with the British East India Company and the United Dutch East India Company?
Rich companies screw over poorer countries to extract resources via dubious deals and shady military actions regardless of their origins - they're just less visible when when they're from your neck of the woods and nice to your circle of people.
Still, those nasty Saudi's in Yemen right?
Killing innocents with, wait, where'd they get those weapons from?
> their workforce and costs are basically staying the same
You sure about that? they use massive amounts of energy themselves, all of which is much more expensive. Labor costs are way up among nearly all wage-based occupations (and if BP doesn't keep up, their employees will jump ship to competitors). Transporting gasoline to every street corner on multiple continents, more expensive. Taxes -- as the article indicated, huge new levies have been recently introduced. New regulations all over the globe add enormous amounts of red tape, or make certain operations impossible to build or operate, all of which pushes capital costs higher. Rising interest rates makes their borrowing costs higher.
Can you imagine if they didn't follow market pricing and kept their pricing way below everyone else's? They would sell out of oil in a heartbeat including future contracts and chaos would ensue, it would be the end of that company then everyone would go back to paying market rates to everyone else 10 minutes later (buying BP's carcass shortly after that). It would need global co-operation to fix oil pricing which currently doesn't exist.
I would not call it short termed but rather within the realm of possibility for BP. Oil&Gas are inelastic and with small fluctuations in supply or demand the price varies strongly. In 2020, we even saw negative prices in Ohio and last year prices >100$USD/bbl. OPEC has some room when it comes to increasing it's output, but I think BP, Shell, Equinor, etc. are already at max production. Adding more production takes a lot of time and heavy investment and has
hugh payback time.
Maybe they are assuming the demand destruction is coming anyway? CO2-saving measures measures and the work from home trend would reduce long-term demand for fuel anyway. So they might have seen the chance to grab some profit while they still can.
All while we are trying to get away from fossile fuels. At least superficially there is a mismatch here, between the profits and some perceived Zeitgeist.
Does BP do many other things, besides fossile fuels?
The real question is: how big are their profits/profit margins for the new market?
Edit: and here is the money quote:
> The company acknowledged that its fast-growing clean-energy business - including its solar, EV-charging and wind ventures - continues to lose money. BP does not expect profits from those businesses until at least 2025.
Investment is like that. First you spend on acquiring stuff, like building a large wind farm in the ocean. Then it starts to bring money, and eventually pays for itself.
All the time while you are building the wind farm, you are spending more than the installation makes (it makes nothing), so you are losing money.
> All while we are trying to get away from fossil fuels. At least superficially there is a mismatch here, between the profits and some perceived Zeitgeist.
Not necessarily.
You might be right, but as someone said: the best and most profitable to their makers buggies were probably built in the first few years before cars took over road transport.
We won't know which of these it was until after the fact.
> Does BP do many other things, besides fossil fuels?
They probably do many other things, such as any large enterprise. The real question is: where do most of their profits come from, and would they be able to pivot away to another major profit center? History tells us that most other companies in this situation don't have other major profit centers nor are they able to create new ones. There are exceptions, of course, that's why we call them exceptions :-)
Regardless of what the perceived Zeitgeist might be, oil is still king and will remain for many years to come; it has incredible momentum and has been defining the world's economics for almost 200 years now, look at any chart with global GPD to oil consumption.
I hate stats like this. Of course it's the biggest ever, there is more money in circulation than ever before.
You see this in politics a lot, a classic from the Teresa May era was "there are more kids going to schools rated Good by Ofsted than ever before." There are more kids alive than ever before, so it's not much of an achievement is it.
I don't agree with the orginal statement because increased revenue doesn't necessarily equal profit but a simple explanation to your question is that the amount of humans increase. This results in increased demand bur doesn't mean that every person gets more. Similar how GDP has been increasing in Sweden for a long time but GDP per capita hasn't.
Most metrics do actually go up right now because of the massive inflation and the massive amount of money that was printed with the stimulus. I wouldn't argue that people are " richer" because they're purchasing power has been massively eroded, but across the board the numbers have went up technically.
What I mean is that telling me in the headline that it's their biggest profit in 114 years does not mean anything to me, it doesn't give me any scale of the achievement, because lots of things today are much bigger than any time in the last 114 years: population, money circulation, GDP/GNI, resources consumed
The final sentence in my comment makes this quite clear, I think.
It's a little more complicated than that. First, Oil & Gas in the UK pay 40% corporation tax to start with (30% corp, 10% supplementary), and the levy is on top of that, meaning they're paying 75%. However, there's an "investment allowance" that means most Oil & Gas companies in the UK can shuffle things around to not pay anything, and they're only paying these rates on UK profits which are only a tiny share of their profits.
So that's a huge win for the Exchequer...
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