Oil giant BP has reported its highest profit for eight years, prompting calls for a windfall tax on energy companies.
BP posted a profit of $12.8 billion (£9.5 billion) for 2021, and made more than $4 billion in the final quarter of the year when oil and gas prices surged.
The jump in energy prices means households are facing huge increases in gas and electricity bills from April.
Labour said it was “only fair and right” that energy firms making higher profits should pay more tax.
Last week, rival oil giant Shell also reported bumper profits of $19 billion on the same day that the energy regulator announced UK householders would see a 54 percent rise in their domestic energy bills in April.
Commentators say energy firms are raking in excess profits on the back of fuel poverty and “creeping climate apocalypse”.
However, firms like BP argue they are facing an unprecedented challenge: while the global economy remains heavily dependent on fossil fuels, they are being urged to shift to lower carbon alternatives, and need big profits to fund that transition.
BP’s chief executive Bernard Looney told the Financial Times even a one-off windfall tax this year would divert profits away from investing in gas supplies and in low carbon energy.
“I don’t think a windfall tax is going to incentivise people to invest in the thing that we need right now,” he said.
A windfall tax is a one-off tax imposed by a government on a company or group of companies.
The idea is to target firms that were lucky enough to benefit from something they were not responsible for – in other words, a windfall.
An example of such a windfall would be high energy prices. Companies that get oil and gas out of the ground are getting much more money for it than they were last year, largely because there has been so much more demand as the world emerges from the pandemic.
There is much debate over whether the energy industry can be relied on to pursue a renewables revolution quickly enough, and whether imposing higher taxes would slow down that change or provide the incentives to accelerate it.—BBC