BP’s prof its treble to £7 bn as households battle to pay fuel bills
As anger mounts over oil giant’s bumper profits amid rocketing energy bills . . .
BP triggered a profiteering row yesterday as the company cashed in on soaring fuel prices to treble profits to a 14-year-high.
The oil and gas giant reported profits of £6.9billion for the three months to June 30 – up from £2.3billion in the same period last year.
The increase came against the background of warnings that household energy bills are set to remain at more than two-and-a-half times their pre-crisis levels until at least 2024.
Cornwall Insight, one of the country’s most respected energy consultancies, said bills will hit £3,359 per year from October for the average household, and will not fall below that level until at least the end of next year.
The price cap on energy bills, which regulates what 24million British households pay, will hit £3,616 from January and rise further to £3,729 from April.
It will begin to fall after that, but only slowly, reaching £3,569 from July before hitting £3,470 for the last three months of 2023, the analysis said.
The latest price cap predictions are hundreds of pounds above previous forecasts from Cornwall Insight, but are slightly lower what another consultancy, BFY, has predicted.
Bosses at BP plan to give away £3billion of its profits to shareholders over the next three months as millions suffer the biggest cost of living squeeze since the 1950s.
Last November BP’s 52-year-old chief executive Bernard Looney described the company as a ‘cash machine’. His own pay has almost doubled to nearly £4.5million. The profits at BP mirror similar stellar results for Shell, Centrica – the owner of British Gas – the French company Total Energies and Exxon Mobile of the USA.
The firms are cashing in from Russia’s invasion of Ukraine, which has pushed up the wholesale cost of gas and oil way beyond what any of the companies could have expected.
Last week British Gas owner Centrica reported half-year profits of £1.34billion, five times higher than a year earlier. Meanwhile, Shell reported record quarterly profits of nearly £10billion between April and June.
The revelations have triggered calls for new taxes on windfall profits to raise funds to support the poorest households.
The situation throws up a point of difference in the Conservative leadership race. As chancellor, Rishi Sunak set out a £5billion windfall tax on energy giants to fund subsidies of up to £1,200 for poor households.
But Liz Truss says she is opposed to windfall taxes. Yesterday her supporter Jacob Rees-Mogg said: ‘You need a profitable oil sector so it can invest in extracting energy.’
Greenpeace and Friends of the
Earth, as well as Labour and the Liberal Democrats, say that the huge profits justify an even bigger windfall tax than the one announced so far.
The boss of the green energy firm Ecotricity, Dale Vince, said oil and gas giants are ‘holding a shedload of money that simply is coming from hard-pressed bill-payers’. Rachel Reeves, the shadow chancellor, said: ‘People are worried sick about energy prices rising again in the autumn, but yet again we see eye-watering profits for oil and gas producers.’
Mr Looney, who took over BP in February 2020, said: ‘In terms of cost of living, we all have to recognise it is a very difficult place for people... we understand that, we get it.’
He said the firm is using its profits to invest in renewable energy. However, it will also be spending an extra £410million on new gas and oil fields to cope with the energy crunch caused by Russia.
■ Research by the RAC says petrol retailers are failing to pass on falls in fuel prices. The motoring group said the wholesale figure for unleaded petrol suggests that the pump price should be around 167p a litre, however drivers are being charged around 183p.
‘A shedload of money’
BP shareholders are in line for a mammoth £2.9bn windfall as it launched another share buyback after delivering its highest quarterly profit in 14 years.
The sum, announced alongside the company’s results for the second quarter, follows a £2bn ($2.5bn) buyback unveiled earlier this year.
While the results have caused outrage among motorists, energy bill payers and politicians, they are good news for shareholders – many of whom have been long-term investors.
The buybacks will boost the nation’s pension coffers as well as retail investors and institutional backers including Legal & General and Royal London Asset Management. They are popular among investors as they reduce the number of shares in a company available for trading, boosting the value of the remaining stock.
BP also raised its quarterly dividend by 10pc to $0.06 per share, taking the payout to just around £820m.
The bumper payments came as the energy giant reported profits for the three months to the end of June had tripled to £6.9bn from £2.3bn last year. It is a hefty reward for investors in the oil giant, which saw its shares crash to a 26-year low in 2020 as lockdown measures caused energy demand to plunge.
The stock has since regained most of its lost ground and rose another 2.8pc, or 11p, to 403.35p following the quarterly results.
But Chris Beauchamp, chief market analyst at IG, said the buyback and dividend hike could serve as a ‘high water mark’ for the company.
BP has cashed in on soaring oil and gas prices that have been fuelled by supply disruption caused by the war in Ukraine, as well as a rebound in demand as the global economy recovers from the Covid-19 pandemic. In recent months, Russia has cut back supplies of natural gas to Europe, raising fears that it could turn off the taps altogether as winter approaches and sending prices soaring on international energy markets. The crisis has also caused energy bills in the UK to skyrocket, with the average household expected to be paying over £3600 per year at the start of 2023. Last year, BP boss Bernard Looney described the energy market as a ‘cash machine.’
But the enormous profits across the industry have attracted outrage from politicians and campaigners, who have argued that the companies are profiting off the cost of living squeeze.
In a bid to ease growing popular anger, Looney, 52, and BP finance boss Murray Auchincloss have also said they will donate their £400 energy bill discount from the Government to charity.
But the gesture is unlikely to cause much financial pain for Looney, who was paid nearly £4.5m by BP last year. He is on course to receive £11.4m this year if bonus targets are met.