Mick the Ram

Mick the Ram

Shell report record annual profits of over £32 billion

To a backdrop of a crippling cost of living crisis, gas and oil giant Shell have reported astonishing annual profits of £32.2bn ($39.9bn) for 2022, which was double that of the previous year and the highest in the company’s 115-year history.

Russia’s illegal invasion of Ukraine is largely responsible for the surge in energy prices which has left households and businesses across the UK struggling desperately to meet payments. It has prompted outrage from political opposition parties who are fuming at the lack of government intervention and their continued practice of letting not just Shell, but all the major energy companies, “off the hook” with regards to paying taxes.

Alarming price rises as a result of invasion

Energy prices had begun to climb anyway in the aftermath of the Covid lockdowns, but rose alarmingly from March of last year, after Putin sent his troops across the border to attack his neighbour, which induced huge concerns over supplies. In an effort to try and assist in bringing down rising energy bills, Downing Street introduced a windfall tax, which they called the “Energy Profits Levy”, to be brought against firms which were making what they deemed to be “extraordinary” earnings.

Backtrack out of guilt?

Shell initially stated that it did not expect to pay any UK tax this year, due to it being in a position to offset decommissioning costs and investments in projects in the country, against any profits made. However, possibly through moral pressure, the company announced this week that it was due to pay $134m in UK windfall tax for 2022, and expects to pay more than $500m this year.

Still nowhere near enough for a UK headquartered company

There are two arguments with regards to these totals: firstly on the face of it they look tiny amounts when compared to the profits announced, but Shell would contend that it only gains around 5% of its revenue from the UK market, with the bulk of it made and taxed in other jurisdictions.

The windfall tax only applies to profits made from extracting UK oil and gas. The rate was originally set at 25%, but has now been increased to 35%. Firms also pay 30% corporation tax on their profits, together with a supplementary 10% rate.

However, just as Shell have done, companies are able to reduce the amount of tax they pay by factoring in losses, or other spending. The counter-argument from critics is that they are happy to have their headquarters in the UK and have been consistently paying more to its shareholders than it spends on renewable investments.

Government showing little appetite to amend ruling

The beleaguered government is under huge pressure to start raising significantly more money for the country out of the astronomical profits being made from oil and gas, but despite accepting that there would be anger in the UK at discovering the unbelievably vast sums being quoted as profits, at a time of great hardship, they did not at this point have any plans to amend their policy on windfall taxes.

Intention remains to hit households from April

Instead they do still intend to raise the threshold on an average UK household energy bills from £2,500 to £3,000 from April. This would take the money a typical family would be asked to find up to almost three times that which they would have been paying this time last year, before Russia’s invasion.

Opposition leaders are demanding that the proposed increase has to be scrapped. Liberal Democrat leader Ed Davey said: “No company should be making these kind of outrageous profits out of Putin’s illegal invasion of Ukraine; they must be taxed properly and at the very least ensure that energy bills do not rise yet again in April.”

TUC general secretary Paul Nowak called for ministers to impose a larger windfall tax, insisting that “Instead of holding down the pay of paramedics, teachers, firefighters, and millions of other hard-pressed public servants, ministers should be making big oil and gas companies pay their fair share.”

Attempts at justification

The annual profit figure far surpassed Shell’s previous record set back in 2008. Then almost rubbing salt into the wound, the company also said it had paid out $6.3bn to its shareholders in the final three months of 2022, and that it planned another $4bn share buyback.

Attempting to justify these obscene numbers, Shell chief executive Wael Sawan said that in difficult times around the world, his company was playing its part by investing in renewable technologies; whilst chief financial officer Sinead Gorman, was keen to point out that Shell had paid $13bn in taxes globally in 2022.

Backtracking on earlier pledge

Shell had originally said last year that they intended to spend somewhere between £20bn and £25bn on UK energy over the next 10 years; but in light of the windfall tax ruling, boss David Bunch cast doubts on that earlier “commitment” when he said that the company would now: “have to evaluate each project on a case by case basis”, because there would be “less to invest”.

Just to state again, in 2022 Shell made a profit of… £32.2 billion!


Submit a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.