After Russia invaded Ukraine last year, energy prices went up, which led to record annual profits for the oil and gas company Shell.
In 2022, profits will reach $39.9 billion (£32.2 billion), which is twice as much as last year and the most in its 115-year history.
Since oil and gas prices went up after the invasion of Ukraine, energy companies have made more money than ever before.
It has put a lot of pressure on businesses to pay more taxes at a time when families are struggling to pay their bills.
Opposition parties said that Shell’s profits were “outrageous” and that the government was “letting energy firms off the hook.” They also asked that the planned increase in the price cap for energy in April be canceled.
After the Covid lockdowns ended, energy prices started to go up, but they went up quickly in March of last year after events in Ukraine caused people to worry about supplies.
After the invasion, the price of a barrel of Brent crude oil went up to almost $128, but it has since gone down to about $83. Gas prices also went up, but they have since gone back down.
It has led to huge profits for energy companies, but it has also caused home and business energy bills to go up.
The Energy Profits Levy, which is a tax on “extraordinary” earnings, was put in place by the UK government last year to help pay for its plan to lower gas and electricity bills.
Despite the move, Shell said it didn’t expect to pay any UK taxes this year because it can subtract decommissioning costs and investments in UK projects from any UK profits.
But on Thursday, it said that it had to pay the UK a windfall tax of $134 million in 2022 and that it expected to pay more than $500 million in 2023.
This may not seem like much, but about 5% of Shell’s income comes from the UK. The rest of its money comes from other countries, where it is made and taxed.
But critics say that Shell is based in the UK and has been giving more money to its shareholders than it has been putting into renewable investments.
Rishi Sunak and Jeremy Hunt are under more pressure after the announcement to get more money from oil and gas profits.
A Downing Street official said they “absolutely” understand why people are angry about the “extraordinary” profits, but there are no plans to raise the windfall tax.
When reporters asked about possible changes, the prime minister’s spokesman said, “Ask the chancellor.”
The official said that the government is “ready to take action” if falling wholesale energy costs don’t lead to lower gas prices. He or she didn’t say what those actions would be, though.
The government is putting limits on gas and electricity bills right now, so a household that uses an average amount of energy will pay £2,500 a year.
But that is still more than twice what it was before Russia invaded, and in April, the limit will go up to £3,000.
The government’s windfall tax only applies to profits made from getting UK oil and gas. Originally, the rate was 25%, but it has now been raised to 35%.
Oil and gas companies also pay a 30% corporation tax on their profits and a 10% rate on top of that. With this and the new tax on windfalls, their total tax rate is now 75%.
However, firms can reduce their tax liability by writing off expenses like dismantling oil platforms in the North Sea or by claiming losses. As a result, BP and Shell, two of the biggest names in the energy industry, have avoided paying any or much tax in the UK in recent years.
Shell’s previous record for an annual profit was set in 2008. The company also said that it had given $6.3 billion to its shareholders in the last three months of 2022 and planned to buy back another $4 billion worth of shares.
Wael Sawan, the CEO of Shell, said that these are “extremely hard times” because inflation is rising all over the world, but that Shell was doing its part by investing in renewable technologies.
Sinead Gorman, the company’s chief financial officer, added that Shell had paid $13 billion in taxes around the world in 2022. It was also responsible for 11% of shipments of liquefied natural gas into the EU, easing the pressure on supplies caused by sanctions against Russia.
Ed Miliband, who is the shadow secretary for climate change for Labour, said: “The British people will have to pay 40% more for energy in April, but the government won’t implement a proper windfall tax on fossil fuel companies that are making huge profits.
“Labour would stop the energy price cap from going up in April because it’s only fair that companies making unexpected windfall profits from war money pay their fair share.”
Liberal Democrat leader Ed Davey has remarked, “Putin’s illegitimate invasion of Ukraine shouldn’t enable any corporation to generate such large profits.
“They need to properly tax oil and gas companies and at least make sure that energy bills don’t go up again in April.”
Paul Nowak, the head of the TUC, asked ministers to impose a higher windfall tax and said, “No more excuses.”
He went on to say, “Instead of holding down the pay of paramedics, teachers, firefighters, and millions of other hard-pressed public servants, ministers should make big oil and gas pay their fair share.”