Home Business NewsBusiness Why big oil is under pressure as consumers eye energy price hikes

Why big oil is under pressure as consumers eye energy price hikes

by LLB Reporter
3rd Feb 22 11:19 am

Calls for a windfall tax on those oil and gas giants are likely to get louder following the latest financial update from London based Shell.  It’s profits for the last quarter stormed in at an incredible £12 billion bolstered by scorching energy prices that are having such an impact on the lives of ordinary people.

Just that one quarter of one company’s profits would go a long way to cover the anticipated cost to UK households when the new energy price cap is introduced.

If all 22 million households expected to be impacted by the rise in the price cap have to fork out the anticipated additional £600 a year that figure would come in at just over £13 billion.  Of course, that number is poised to rise further come the autumn which is why the government is expected to announce a series of measures to cushion the blow later today, measures which the taxpayer will be asked to underwrite.

Danni Hewson, AJ Bell Financial Analyst, comments on calls for a windfall tax after Shell’s latest profit guidance:“Shell has been unlucky with its timing, but with BP just days away from its trading update questions about whether a windfall tax is a viable solution to the current energy crisis will hang around.  Of course, it’s not a straightforward argument, both businesses have a duty to their shareholders, the people who bankroll their operations in good times and in bad.  And there have been plenty of bad times not least over the last couple of years when Covid lockdowns wreaked havoc with the very businesses that are now enjoying such remarkable good fortune.

“Then there is the expectation that “Big Oil” will fund the “Big Transition”.  Both BP and Shell have made pledges to cut oil and gas output and increase spending on renewables.  That comes with a significant price tag and there has been growing pressure on both businesses to increase the amount of money they spend on speeding up that transition.  Both businesses could shore up considerable goodwill amongst consumers, politicians and activists alike if they took this opportunity, and a chunk of their profits, and supercharged their clean, green spend, making consumers less reliant on those oil and gas supplies which have caused such a price pickle. But of course, what goes up must ultimately come down.  Energy prices will normalise and profits will become harder to come by and both the companies and investors will have to shoulder the burden along with the bounty.”

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