Multinational energy giant Shell has reported a 53 per cent increase in profits to £68.1bn for 2022 – the highest in its 115-year history.
The annual profit announcement, which comes off the back of rocketing oil prices being driven by Russia’s illegal war in Ukraine, surpasses the company’s previous record set in 2008.
The company reports that its earnings adjusted for taxes also doubled to £32bn, reviving calls for Rishi Sunak’s government to further expand its windfall tax on energy profits.
During his time as chancellor in May 2022, Mr Sunak introduced a temporary 25 per cent Energy Profits Levy to tax excess profits on top of the 40 per cent tax the oil and gas giants were already paying (30 per cent corporation tax and a 10 per cent supplementary rate).
While the move took their total tax commitment to 65 per cent and was estimated to be worth an additional £5bn a year to the national balance sheet, much of it was offset through a tax release scheme for companies investing in extraction projects in the North Sea. That allowed them to reduce their tax liability by factoring in losses or spending on necessities such as decommissioning old platforms.
Without such allowances, Labour argued in October, that £8bn could have been raised from companies such as Shell and BP to support the public, which has faced soaring domestic energy bills this winter and inflation at a 40-year high.
Liz Truss, during her brief reign as prime minister, resisted amending the levy in favour of her swiftly discredited “growth, growth, growth” initiative, arguing that higher taxes could deter major companies from investing in Britain.
But once Jeremy Hunt succeeded Kwasi Kwarteng in No 11 and she had been deposed, the new chancellor announced that the levy would rise from 25 per cent to 35 per cent during his grim Autumn Statement in November, saying he expected to raise an extra £14bn a year by doing so.
Last month, Shell said that, in light of that decision, it would be paying tax in the UK for the first time since 2017, having previously offset decommissioning costs and investments in UK projects against any UK profits in line with the government’s allowances.
Its results announced on Thursday revealed that it had paid £1.5bn in windfall tax charges to the UK and EU in 2022 and, according to the BBC, the company expects to pay “hundreds of millions” more in 2023.
Globally, in 2021 (the last complete year for which records are available), Shell said it paid £47.6bn in tax to world governments and a further £10.4bn in other payments.
The company’s rival BP has said it expects to pay £649.5m in UK windfall tax for 2022.
Energy prices had already begun to climb following a spike in demand inspired by the end of Covid-19 lockdowns early last year but began to rise really sharply in March after Vladimir Putin launched the war in Ukraine.
Western nations opposed to the war moved quickly to sever commercial ties with Moscow and imposed tough sanctions as punishment for Russia’s aggressions.
But doing so meant shunning one of the world’s biggest energy producers and exporters, placing a squeeze on alternative sources of oil and gas from elsewhere as prices surged and hardship followed at home, underlining the folly of relying too heavily on the goodwill of foreign powers to meet domestic energy needs.
Brent crude oil reached almost £104 a barrel in the wake of the invasion but has since dropped back down to about £67.
Gas prices also spiked but have likewise since come down.
Responding to Shell’s announcement on Thursday, Labour, the Liberal Democrats and climate change campaigners all renewed their calls for the government to do more.
Shadow climate secretary Ed Miliband said: “As the British people face an energy price hike of 40 per cent in April, the government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.
“Labour would stop the energy price cap going up in April because it is only right that the companies making unexpected windfall profits from the proceeds of war pay their fair share.”
Liberal Democrat leader Sir Ed Davey agreed, saying: “No company should be making these kind of outrageous profits out of Putin’s illegal invasion of Ukraine.
“Rishi Sunak was warned as chancellor and now as prime minister that we need a proper windfall tax on companies like Shell.
“They must tax the oil and gas companies properly and at the very least ensure that energy bills don’t rise yet again in April.”
Greenpeace spokesperson Elena Polisano meanwhile accused Shell of “profiteering from climate destruction” as her organisation trolled the company by erecting a spoof price display outside of its London headquarters.
“While Shell counts their record-breaking billions, people across the globe count the damage from the record-breaking drought,” she said.
For his part, Shell’s new chief executive Wael Sawan said the company’s results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world”.
“We believe that Shell is well positioned to be the trusted partner through the energy transition,” he added.
“We intend to remain disciplined while delivering compelling shareholder returns.”
