Shell Makes “Obscene” $40bn Profit!

The U.K. government is under pressure to rethink its windfall tax on energy companies after Shell reported one of the largest profits in UK corporate history. With the surge in energy prices sparked by Russia’s invasion of Ukraine, Shell profit reached $40bn (£32bn) for 2022. This bonanza is the biggest in its 115 year history. Some have said it is “outrageous”.

The performance puts Shell on a par with the £38bn British American Tobacco made in 2017, but still behind the £60bn Vodaphone achieved in 2014, when the telecoms group sold its US business.

The stellar annual profits of Shell plc and BP plc — almost US$68 billion combined — are set to intensify the debate on UK taxation as households suffer a cost-of-living crisis driven partly by rocketing oil and gas prices.

Homes in Britain saw energy bills more than double last year, while motorists paid record prices at the pump. The soaring profits of oil and gas producers, and the deluge of cash they channelled to shareholders, have sparked the ire of politicians and unions, many of whom have called for higher windfall taxes.

BP reported full-year adjusted profit of US$27.65 billion, an all-time high, with earnings at its retail division more than tripling as petrol prices surged. The company announced a 10% increase in the dividend and an extra US$2.75 billion of share buybacks.

With Tories in power, increase in taxes is a “No-No” – especially if you the Liz Truss faction campaigning low taxes and high growth. This idea of a tax reduction will stimulate growth or what is sometimes called “trickle-down’ economics, is complete bunkum. This is actually back to the Reagan era with the Laffer curve. If taxation is above 50%, then you may have a positive outcome in increased output or GDP. Otherwise it is as good as singing the benefits of Brexit or that Saddam Hussein has weapons of mass destruction – a whole lot of crap!

So, for now raise the windfall tax and negotiate a fair deal with unions and assist those with cost of living issues.

References:

Calls for bigger windfall tax after Shell makes ‘obscene’ $40bn profit, Alex Lawson, The Guardian, 2 Feb 2023

Oil giants’ US$68b profits set to fuel UK tax debate, Simon Lee, CeoMorningBrief, 7 Feb 2023