BP’s problem, like that of the other oil supermajors, is it has more money than it can justify what to do with.

BP knows what it would like to do with the windfall profits being made from the Ukraine-induced rise in energy prices: return them to shareholders. It announced a 10 per cent rise in its dividend and another $3.5bn in buybacks on Tuesday. Shell did something similar last week.

Of course, it talks a lot about spending on low-carbon technologies and the “energy trilemma”: investing to achieve a more secure, affordable and cleaner energy supply.

Those plans are a goodish defence against the public calls for windfall taxes.

The problem is these are long-term projects. Decisions are taken over a period of years. Results turn out over decades. While BP can promote various investment commitments — £18bn to be spent in the UK by the end of 2030 — they were not dreamed up as a response to this year’s record profits.

BP already faces considerable scrutiny from investors over its renewable spending plans. Saying it would splash further cash without being able to specify returns would be unlikely to help its share price, which has lagged some of the other oil companies. Investors took a dividend hit during the pandemic. They do not want a repeat performance now the going is good again.

The problem comes with the divergence of BP’s fortunes from wider society. During 2020, these were more aligned: everyone suffered together. Now it is very clear that however much the likes of BP and Shell talk up the fact that their dividends and buybacks benefit British pensioners, household energy bills are on course to hit £3,400 come October and that means the average British person is about to be very much worse off.

BP’s argument is, more or less, that this disparity is a political problem for the government to solve. It does not want to be in the business of making decisions about how to redistribute resources, for example by cutting petrol prices. It’s the government’s job to decide how much to tax it, and then how to spend those takings to help households.

This is, in theory, a fair point. We do not want it to become the job of oil and gas companies.

But it does not mean goodwill gestures are futile. In fact they can be politically and financially astute. TotalEnergies’ announcement of a cut to prices at the pump in France, staving off an extra domestic tax on profits, is a good example.

And BP has not done itself many favours by failing to spell out how much more it expects to pay from the new levy on North Sea energy profits (a windfall tax by any other name), as Centrica did last week. Nor from the fact that it did not pay any tax on its North Sea operations for years, a situation that persisted right up until it coughed up £100mn in 2021.

The other problem is the total absence of leadership from the UK government of late, as estimates for domestic bills have continued to creep up.

In May, when it announced a £400-plus support package for households, the price cap on energy bills was expected to rise to £2,800 in October. Now the forecast is for £3,400 and for bills to keep on climbing. Policy proposals from the two Conservative leadership candidates only cut another £152-£167 from households’ expected outgoings, reckons Investec analyst Martin Young.

Leadership contender Liz Truss in particular has been clear she does not want to tax windfall profits. But it will be hard to quiet those calls — or explain the government’s resistance — if politicians cannot clearly spell out what else they are doing to help individuals.

Clearly it would be better to have a tax structure that dealt effectively with windfall energy profits every time they came around. It would also be better to have a strategy for energy security that both companies and consumers could feel confident in.

As it is, the windfall problem is not going away. High household bills may endure until at least 2024. Next quarter’s oil company earnings will bring another round of windfall tax calls, as BP implicitly acknowledges with its forecasts. Green investment promises will not stave them off.

Boris Johnson’s government had a habit of delaying difficult decisions before caving to popular pressure. There is little to reassure the oil companies that British politicians will not yet go the way the wind is blowing.

cat.rutterpooley@ft.com
@catrutterpooley