Issue of the week: Big Oil’s latest gusher
The profits are rolling, but BP is struggling to reconcile shareholders’ demands with its green agenda
“At the end of the day, we’re responding to what society wants,” said BP boss Bernard Looney as he announced a record annual profit of nearly $28bn. At the same time, he controversially “dialled back targets for reducing dependence on fossil fuels”, said Jenny Strasburg in The Wall Street Journal. The bumper figures, which came days after Shell reported profits of £32bn, further inflamed the debate over whether Big Oil should be paying more back to society through windfall taxes. Greenpeace accused BP of “mining gold out of vast suffering” by profiting from the Ukraine War. The shadow climate secretary, Ed Miliband – who is pushing for a higher tax to extend the domestic energy price cap – charged that “the windfalls of war” were “coming out of the pockets of the British people”. The TUC perhaps put it most succinctly. Having nearly doubled profits in the space of a year, it observed that BP is “laughing all the way to the bank”.
Looney argued that the world is “a different place” and “needs energy that is secure and affordable as well as lower carbon”. Well, yes, said Alistair Osborne in The Times. But these results also prove that “pollution pays”. Halving the dividend to help pay for Looney’s previous green pledges is one reason why BP’s total shareholder return has underperformed Shell by about 15%,
TotalEnergies by 30%, Chevron by 60% and ExxonMobil by 100%. No wonder shares jumped 7% on news of a partial recantation. “Right-on BP” has been “wrong-footed by a different kind of climate change”, said Oliver Shah in The Sunday Times. The board has been taught a stinging lesson. “Blank cheques written with shareholders’ future returns are a hostage to fortune if the investment climate changes.”
The calls for a “proper” windfall tax on Big Oil are the least of Looney’s worries, said Nils Pratley in The Guardian. “A more powerful influence is the company’s own shareholders, who have clearly demanded a rethink on previous pledges to slash hydrocarbon output by 40% this decade.” Three years ago, Looney declared: “The direction is set. We are heading to net zero. There is no turning back.” His new decision to scale back that target to 25% “may not count as a U-turn”, but it’s certainly a major detour. One wonders “whether even the diluted hydrocarbon pledges are vulnerable to a rethink”. You can argue all day about whether a “proper” windfall tax on North Sea profits would set the headline rate at 75%, as now, or at 78%, as prevails in Norway. But the real “signal” from this results season is that “the transition to a lower carbon energy system will take longer than previously forecast”.