Oil titans are failing to help in energy security race

Instead of significant investments in Britain to help tackle the energy crisis, BP is boosting its payouts for shareholders as its profits soar

If BP was a cash machine last year, in the words of tin-eared boss Bernard Looney, then what on earth is it now? A money fountain might be a better description, after the oil giant posted its highest profits in nearly a decade and a half. Unfortunately however, the company is largely only spraying cash in the direction of shareholders. Not for the first time, this isn’t a great look. In fact, it’s a terrible one.

On the same day that experts warn of yet further crippling bill rises for struggling families, BP has posted its second largest-ever profits, on the back of strong refining margins, “exceptional” oil trading and higher energy prices – $8.4bn (£6.8bn) in the past three months alone, eclipsing the $6.2bn it generated in the first financial quarter of the year.

Yet, with surplus cash of $6.6bn from the most recent period, its response is as predictable as ever: another shareholder bonanza in the form of a further $3.5bn of share buybacks, and a 10pc increase in the dividend, equivalent to roughly another $1bn. Big oil loves showering investors with cash but the timing of this latest megawindfall is laughably bad.

Coming as experts warn that the price cap is heading to £3,600 this Christmas, having been just £1,400 less than a year ago, and petrol prices hover around record levels, bill payers may reasonably ask if BP and its rivals are now just rubbing their noses in it.

Fresh research from Nationwide outlines just how much of an impact the energy crunch is having. With the ability to shop around for cheaper fuel limited, consumers are cutting back in other areas so that they can continue to make essential trips such as driving to work, running errands and visiting the supermarket.

More than a third of people are spending less on food so that they can keep their car on the road. Sixty per cent said they cannot afford to replace their petrol or diesel vehicle with an electric one.

The responsible course of action from BP, Shell and other big names in the oil industry would be to ramp up investment at home, bolstering Britain’s energy independence and bringing down bills. There is nothing wrong with making excess profits but Britain is facing a massive crisis and it is unacceptable that more of that money isn’t being directed to helping the country deal with it.

The industry likes to make a big song and dance about how payouts are funnelled into pension funds but the idea that those facing fuel poverty are the same people that are financing their lifestyles with FTSE 100 dividends is obviously nonsense. They are at different ends of the social spectrum.

If BP is too blind to see the moral case for more action then it can surely see the commercial wisdom. In an attempt to offset the impact of a windfall tax, the Government has offered tax breaks to companies that plough more money into the North Sea. It is an open goal from ministers.

By squandering the chance to champion Britain’s energy security, oil and gas explorers are painting a target on their own backs for Big Oil’s fiercest critics. As one MP reportedly said when a windfall tax was being debated: “It is like they are goading us”. Labour was quick to describe BP’S profits as “eye-watering”, while calling for the Government to scrap the tax breaks that were offered alongside May’s windfall tax.

On the other side of the house, Brexit opportunities minister Jacob Rees-mogg, warned against a raid on oil profits: “I’m not in favour of windfall taxes. You need to have a profitable oil sector so it can invest in extracting energy,” he told LBC radio.

That would be a perfectly legitimate argument if meaningful amounts were either being invested in the North Sea or into clean energy projects. Yet all Looney can do is point to the same vague £18bn investment programme that BP drew up before the energy crisis erupted.

What’s worse, he can’t even tell reporters how much of that will be spent in the UK this year, perhaps because the figure is genuinely miniscule. While BP managed to find $6.1bn (£5bn) to buy back its own shares in the first half of 2020, it spent less than $400m on domestic renewable energy projects, equivalent to little more than 5pc of the total.

On Monday, BP announced that it was investing £50m in an electric vehicle battery testing centre in Pangbourne, Berkshire. Such sums are so paltry as to be almost meaningless.

BP and Shell are quick to point out that they are continually having to balance numerous competing interests, chiefly: the so-called energy transition; projects that improve energy security, and shareholder returns, or what BP boss Looney likes to call “the energy trilemma”.

Yet, it isn’t even close to getting the balance right at a time when the real “trilemma” is the one facing households up and down the country: spiralling food prices, record petrol costs, and rocketing energy bills.

As a man with a peculiar penchant for sporting denim in the office, Looney is in danger of becoming all jeans and no trousers.

‘Oil and gas explorers are painting a target on their own backs for Big Oil’s critics’