Windfall tax risks energy security, says BP chief
Bernard Looney warns a raid on profits at oil majors would make the UK a less stable home for investment
BRITAIN’S energy security will be at risk if Rishi Sunak imposes a windfall tax on oil companies, the head of BP has warned as the country battles soaring fuel prices.
Bernard Looney said a tax raid on his industry would make the UK a less stable environment for investing and potentially hold back plans to wean the country off its dependence on foreign oil and gas.
It came as experts warned of a looming surge in the price of diesel because refineries are struggling to keep pace with demand after supplies from Russia were cut off.
Mr Looney said that BP plans to reinvest all of its profits from the North Sea over the next decade, following months of high wholesale gas prices that have led to record profits for producers.
He added: “What’s our view on windfall taxes? A stable and competitive fiscal environment is an important element in any investment decision – and that is what we have in Britain today.
“By definition, windfall taxes are unpredictable – and so would challenge investment in home-grown energy. We know that from past experience for the whole of the North Sea sector and supply chain.”
The comments, at BP’S annual general meeting in London, are a sign of the pressure felt by oil and gas companies over a potential windfall tax as the rising cost of living dominates the political agenda.
Mr Sunak, the Chancellor, is understood to be increasingly tempted to mount a raid on the industry after weeks of pressure from Labour and the Liberal Democrats.
Meanwhile, Boris Johnson is urging Mr Sunak to go further and faster on relief to help with the living-cost crisis as political pressure mounts and the economy falters. The Daily Telegraph can reveal the Chancellor is considering another one-off reduction in council tax bills and an expansion of the warm home discount as he prepares a package of support for the summer.
But government ministers tapped into discussions have said that No10 is pushing for announcements sooner as Tory calls for an early tax cut grow louder.
One minister said: “No10 are keen to do something from a political point of view but Rishi is pushing back because the Treasury doesn’t like spending money.
“Clearly the political pressure is ramping up. They will have to do something.”
Energy prices are a key cause of the cost-of-living squeeze, with households stung by a 54pc increase in the energy price cap in April following months of high wholesale gas prices owing to global gas shortages and disruption caused by Russia’s war on Ukraine.
It pushed average household energy bills up to £1,971, with analysts warning they will climb by several hundreds of pounds more when the cap is reset in October.
Motorists have also faced rising prices at the pump as demand for crude oil leapt following the pandemic.
With Russian diesel exports sharply lower in the wake of the invasion of Ukraine, Western refineries that turn crude oil into the fuel are struggling to process it fast enough. This has pushed up prices.
The International Energy Agency said yesterday that the high price of diesel is “supporting strong inflation trends”.
Simon Williams, fuel spokesman at the RAC, said a new record diesel price is “edging closer” after average UK prices hit 179.55p per litre yesterday – nearing its record high of 179.90p per litre on March 23.
It comes despite a 5p per litre cut to fuel duty, which has been in force since March 23, with Mr Sunak under growing pressure to do more to help with household bills.
Downing Street and Treasury aides
insist that Mr Johnson and Mr Sunak remain on the same page about the determination to take new steps to support households.
But some differences have emerged in public. Mr Sunak is said to be far more supportive of a windfall tax on energy companies than the Prime Minister, with the Chancellor publicly threatening the move unless new investment arrives.
The Prime Minister has not ruled out a windfall tax, but said in an LBC interview this week: “I don’t like them. I didn’t think they’re the right thing.”
Multiple sources tapped into behindthe-scenes discussions said that one policy Mr Sunak is considering is a new one-off cut to council tax bills for millions of households.
It would be a repeat of part of the support package announced for this spring, which saw a £150 council tax rebate given to 20 million households with homes in bands A to D.
Treasury officials are also scoping out whether the warm home discount, which offered poorer families £140 off electricity bills last winter, can be extended for this winter.
But industry experts believe a decision would have to be made within a matter of weeks to make the necessary technical preparations before the support kicked in. Scores of Tory MPS as well as Opposition parties and business bodies are calling for an “emergency budget” before the one due in the autumn to announce tax and spending changes, but the idea is being rejected by the Treasury for now.
Mr Sunak defended his approach yesterday, saying: “I know people are worried about the future, and when we
‘A stable and competitive fiscal environment is an important element in any investment decision’
know a little bit more about what the situation will be, I’ve always said that I stand ready to support families further, because I know these times are difficult.”
BP – which made a $6.2bn (£5bn) profit in the first quarter of 2022 – is committed to investing £18bn in the UK by the end of 2030, including in low carbon hydrogen, wind turbines and electric vehicles, as well as North Sea oil and gas production.
This investment will go ahead regardless of whether a windfall tax is imposed, but further spending may be affected.