In the wake of Russia’s invasion of Ukraine in 2014, the oil and gas giant Shell has declared record-breaking annual profits.
In 2022, profits will reach $39.9bn (£32.2bn). Which is double the previous year’s amount and the biggest in its 115-year existence.
Since oil and gas prices spiked as a result of the invasion of Ukraine, energy businesses have enjoyed unprecedented profits.
It has increased the pressure on businesses to pay more taxes, while families struggle with growing costs.
Opposition parties asserted that Shell’s profits were “outrageous” and that the government “let energy firms off the hook.” In addition, they demanded that the April increase in the energy price ceiling be canceled.
Energy costs rose after the Covid lockdowns, but then surged in March last year due to Ukraine supply fears.
Brent crude oil peaked at $128 per barrel after the invasion and plummeted to $83. Similarly, gas prices soared but have since decreased from their peaks.
It has resulted in record profits for energy firms but also increased energy costs for homes and businesses.
To support its plan to reduce gas and electricity costs, the British government imposed a windfall tax. The Energy Profits Levy – on the revenues of businesses to generate revenue in 2017.
Shell claims the best profits in its 115-year history
Shell previously stated that it did not anticipate paying any UK tax this year because it is permitted to balance decommissioning expenses and investments in UK projects against any UK profits.
However, the company will now state that it paid some tax in 2022 and intends to pay hundreds of millions in UK tax in 2023.
Shell generates and pays taxes on 95% of its revenue outside the UK.
However, this may not be enough to please many who believe a corporation headquartered in the United Kingdom that has set a new record for corporate earnings should pay more, as well as those who will note that Shell paid more to its shareholders than it spent on renewable initiatives.
The government is presently limiting gas and electricity prices so that a typical energy user’s household will spend £2,500 a year.
However, this is still more than double what it was before the Russian invasion, and in April the threshold will jump to £3,000.
The government’s windfall tax only applies to income derived from oil and gas extraction in the United Kingdom. Originally, the rate was 25%, but it has now been increased to 35%.
In addition to paying 30% corporate tax on their income, oil, and gas companies pay an additional 10% rate. In conjunction with the new windfall tax, their total tax rate is now 75%.
However, businesses can lower the amount of tax they pay by deducting losses and expenditures such as North Sea oil platform decommissioning. In recent years, energy majors such as BP and Shell have paid minimal or no tax in the United Kingdom.
“Equitable share”
The annual profit total significantly topped Shell’s 2008 record. The corporation also disclosed that it had distributed $6.3 billion to its shareholders in the final three months of 2022 and that it intended to repurchase another $4 billion in shares.
Wael Sawan, CEO of Shell, stated that the company’s most recent results “show the strength of Shell’s diversified portfolio and our ability to deliver crucial energy to our customers in an unpredictable world.”
Ed Miliband, the opposition climate change secretary for Labour, stated: “With the British public facing a 40% increase in energy prices in April, the government’s unwillingness to adopt a proper windfall tax absolves the fossil fuel giants of responsibility for their soaring profits.
“Labour would prevent the April increase in the energy price cap because it is only fair that corporations reaping unexpected windfall profits from war profits pay their fair share.”
Leader of the Liberal Democrats, Ed Davey, stated: “Putin’s illegal invasion of Ukraine should not generate such absurd profits for any corporation.
“They must properly tax oil and gas firms and at the very least prevent an April increase in energy costs.”
