Britain imposes windfall profits tax, BP, Shell suffered
May 29, 2024, 11:58 AM
TDD-global
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On the 26th local time, British Chancellor of the Exchequer Sunak announced in the House of Commons of the British Parliament that the United Kingdom will impose a 25% energy profit tax on oil and gas companies. The additional tax, which amounts to an additional levy on top of the current rate, is effective immediately and may continue until the end of 2025.
On the 26th local time, British Chancellor of the Exchequer Sunak announced in the House of Commons of the British Parliament that the United Kingdom will impose a 25% energy profit tax on oil and gas companies. The additional tax, which amounts to an additional levy on top of the current rate, is effective immediately and may continue until the end of 2025.
It's a rare windfall profits tax designed to counter the worsening cost of living crisis.
Inflation in the United Kingdom has repeatedly hit new highs. It is reported that the inflation rate of the United Kingdom in March was 7%, a 30-year high; the inflation rate in April reached 9%, a 40-year high. The Bank of England said earlier this month that it expects energy bills to rise further and inflation to hit above 10% by the end of the year.
At a time when inflation is stubbornly high, the price of crude oil and natural gas has soared due to the escalating conflict between Russia and Ukraine, increasing the burden on British households. And thanks to high international demand for energy, BP and Shell both reported sharply higher quarterly profits at the beginning of the month, fueling calls for additional government taxes.
Under pressure from many parties, the Johnson government finally agreed to increase the tax. However, Sunak also said that the tax increase is only temporary and will be phased out when oil and gas return to more normal levels.
British Chancellor of the Exchequer Sunak said oil and gas companies were making "windfall profits" and the new levy was expected to bring in ï¿¡5 billion, or about $6.3 billion, over the next year. Major oil companies such as BP and Shell will be affected by the new tax.
After the announcement of the levy, BP said it would reconsider its plans in the UK.
BP:
Today's announcement is not a one-time tax, but a multi-year proposal. We now need to study the impact of new levies and tax breaks on our North Sea investment plans.
BP has previously said it plans to invest ï¿¡18bn in the UK by 2030 and that the plan is not dependent on the government raising taxes.
Christyan Malek, head of global energy at JPMorgan Chase, commented that the main risk facing the British North Sea oil and gas industry is that after the British government announced the levy, international giants such as BP and Shell believe that the UK is less attractive to them, and the windfall profits tax will give some Projects bring unpredictability, and these projects often take years to develop.
After Nack announced the new tax policy, the stock prices of British Harbour Energy, Shell, bp, etc. all fell to a certain extent, but they rebounded later.
As of the close of U.S. stocks on May 26, local time, Shellâs stock price fell 0.4% to $60.12 per share; bpâs stock price rose 0.93% to $32.67 per share; Harbour Energyâs rise or fall was zero.
In terms of daily oil equivalent production, the top five oil and gas producers in the UK are Harbour Energy, Total, bp, Shell, and NEO Energy.
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