Shell has further fuelled demands for a windfall tax on the sector, as it revealed record first-quarter profits due to soaring oil and gas prices, just days after bumper earnings from rival BP.
The oil giant posted better-than-expected underlying earnings for the first three months of 2022, at £7.2bn – nearly three times the £2.5bn reported a year earlier.
On Tuesday, BP unveiled its highest quarterly underlying profits for more than a decade, at £5bn.
It comes as calls mount from Labour and the Liberal Democrats for a windfall tax on oil and gas firms to help ease the cost-of-living crisis.
The sector is reaping the benefits of rocketing oil and gas prices, which have been pushed to record levels by Russia’s invasion of Ukraine and surging demand as economies emerge from the pandemic.
Chancellor Rishi Sunak has so far resisted pressure to make the firms pay more tax, instead looking to companies making big profits to invest the cash back into the UK.
But Lib Dem leader Sir Ed Davey condemned the government’s refusal to consider the move. “Boris Johnson and Rishi Sunak’s refusal to tax the super-profits of energy companies is completely unforgivable when people are too terrified to heat their homes.
“The excuses of Conservative ministers have been demolished by the boss of BP himself, who said a windfall tax wouldn’t damage investment in the UK.
“This one-off levy would raise billions of pounds that could help vulnerable families with their energy bills now. It is a no-brainer.”
Campaign group Greenpeace said a windfall tax would be the “fastest and fairest way to ease pressure on households feeling the pinch and reduce our dependence on oil and gas”.
Like its FTSE 100 Index rival BP, Shell’s figures also showed a hit from its move to pull out of Russia due to the Ukraine war, as it booked a £3.1bn charge.
Despite this, it still saw current cost of supply earnings attributable to shareholders jump to £4bn in the quarter, up from £3.4bn a year ago; though it was down 38% on the previous three months.
Shell said investor dividend payments and share repurchases hit £4.3bn in the quarter, as part of a plan to buy back £6.8bn of shares in the first half of 2022.
It increased its dividend to 20 pence per share and said it also expects shareholder returns to be more than 30% of cashflow in the second half of 2022.
Laura Hoy, equity analyst at Hargreaves Lansdown, commented: “The Cinderella story we’ve seen among the oil majors continued this week, as Shell posted record profits thanks to an extremely accommodative environment.
“Calls for a windfall tax have been rebuffed by claims that the majors will start to clean up their acts, spending some of the excess to build out their renewables divisions.
“While renewables is just a drop in Shell’s $19bn bucket, it’s likely to become a much larger slice of the pie as the energy transition ramps up - if the group’s able to build out this part of the business to become a reliable profit driver while oil prices are still high, it would make the transition all the smoother.”
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