After energy prices skyrocketed last year due to Russia’s invasion of Ukraine, oil and gas company Shell claimed record annual earnings.
The company’s profits in 2022 reached $39.9 billion (£32.2 billion), an all-time record in its 115-year existence and quadruple those of the previous year.
Companies in the energy sector have enjoyed unprecedented profits since the price of oil and gas spiked after the invasion of Ukraine.
Companies are under increased pressure to increase their tax payments as consumers face rising costs at home.
In order to pay for its plan to reduce gas and electricity prices, the UK government this year imposed a windfall tax on the earnings of corporations dubbed the Energy Profits Levy.
After the conclusion of the Covid lockdowns, energy costs started to rise, but the events in Ukraine in March of last year caused a rapid increase.
After the invasion, the price of a barrel of Brent crude oil spiked to about $128, but it has since dropped to around $83. The price of gasoline likewise increased sharply before declining.
The White House says Exxon’s record profit is disgraceful.
It has resulted in record profits for the energy industry but has contributed to an increase in energy costs for consumers. The rate of inflation (the amount by which prices increase) has reached a 40-year high, largely due to the rising cost of food.
Shell previously stated that it did not anticipate paying any UK tax this year since it is permitted to balance decommissioning expenses and expenditures in UK projects against any UK profits.
BBC has learned that the company will now claim that it paid some tax in 2022 and that it plans to pay hundreds of millions in UK tax in 2023.
Although these figures may seem low in comparison to Shell’s overall profitability, the United Kingdom really accounts for only about 5% of the company’s total income.
Those who believe a corporation domiciled in the UK that has broken the record for corporate profits should be paying more will undoubtedly be dissatisfied, as will those who note that Shell distributed more money to its shareholders than it put into renewable energy.
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Currently, an average energy user’s annual gas and electric bill is £2,500, but that’s set to climb to £3,000 in April due the government cap.
Even so, even after accounting for the influx of Russian troops, the population is still over double what it was before the invasion.
The government’s windfall tax on oil and gas extraction earnings in the UK went into effect in May. Previously at 25%, the rate has been increased to 35%.
Northern Sea oil and gas companies pay a different corporate tax rate than other businesses.
They are subject to a 30% corporate tax rate, in addition to a 10% rate. The new windfall tax added on top of that brings the overall tax rate to 75%.
However, businesses can minimise their tax liability by writing off expenses like the removal of oil platforms from the North Sea. As a result, oil corporations like BP and Shell have owed the UK government next to nothing in taxes over the past few years.
Shell announced earlier this year that it would be making tax payments in the UK for the first time since 2017 due to the new windfall tax.
Wael Sawan, CEO of Shell, said that the results “show the strength of Shell’s unique portfolio, as well as our capacity to deliver crucial energy to our customers in an unpredictable world.”
Shell’s annual earnings for 2018 was significantly higher than their previous record established in 2008. The firm also announced a $6.3 billion dividend payment to stockholders in the fourth quarter of 2022 and a $4 billion share repurchase programme.
Ed Miliband, the shadow climate change secretary for the Labour Party, said, “As the British people face a 40% jump in energy prices in April, the government is letting the fossil fuel companies generating bumper profits off the hook with their failure to adopt a proper windfall tax.”
It is only fair that the firms reaping unexpected windfall profits from the spoils of war pay their due share, and Labor would prevent the energy price cap from increasing in April.
