February 3, 2023

Record Shell profit on soaring energy prices sparks outrage

categories : oil and gas

LONDON: British energy giant Shell on Thursday unveiled record annual net profit of $42.3 billion thanks to surging oil and gas prices, sparking outrage from green groups and unions as the UK endures a cost-of-living crisis. The post-tax figure, fuelled by the invasion of Ukraine by major energy producer Russia, was more than double the amount achieved in 2021, Shell’s earnings statement revealed. Revenue rocketed 45 percent to a dizzying $381 billion in 2022, mirroring huge gains by rivals.

Colossal profits for energy majors worldwide have sparked public fury as consumers see the cost of heating and lighting their homes and businesses rocket. Environmental campaigner Greenpeace on Thursday protested outside Shell’s London headquarters, arguing that the group is “profiteering from climate destruction”.

The Trades Union Congress said an increased windfall tax could help fund wage rises for public sector workers currently locked in a wave of strikes in protests over pay that lags soaring inflation. “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 pay their fair share,” said TUC general secretary Paul Nowak.

Billions for shareholders

Shell said it would return a further $4 billion to shareholders following huge buybacks already last year-and would significantly lift its dividend-following the record earnings. “Our results in the fourth quarter and across the full year demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world,” new chief executive Wael Sawan said in the results statement.

Shell is looking to reinvent itself under the company’s former renewables boss Sawan, who replaced Ben van Beurden in the top seat at the start of the year. Energy firms are under increasing pressure to step up efforts to transition away from fossil fuels as the world scrambles to become a net-zero emissions economy by 2050.

But Shell rival BP said Monday that while the transition could be accelerated by Russia’s war in Ukraine, “oil continues to play a major role in the global energy system for the next 15-20 years”. The invasion a year ago of Ukraine by its neighbour Russia sent oil and gas prices rocketing. Russia is a major producer of fossil fuels and the war resulted in slashed supplies.

Record US profits

Shell’s update comes two days after US energy major ExxonMobil reported an even bigger record profit of almost $56 billion, handing massive windfalls to shareholders. This has caused US President Joe Biden to hit out at American energy giants, including Chevron, insisting they should be helping to reduce energy prices during a cost-of-living crisis. On Tuesday Biden tweeted that the only thing “stopping Big Oil from increasing production (and therefore lowering prices) is their decision to pay shareholders billions instead of reinvesting profits”.

The president’s intervention came after a White House spokesperson told the BBC that Exxon’s record profits were “outrageous”, especially after “the American people were forced to pay such high prices at the pump” in the wake of the Russian invasion of Ukraine.

In a bid to ease the pain for consumers, governments have introduced windfall taxes on the mammoth profits. Shell has revealed that windfall taxes imposed by the European Union and UK following the surge in earnings would cost the group about $2 billion.

“Shell has once more flexed its financial muscles on a massive scale, while riding the waves of an economic cycle which can bring major challenges as well as rewards,” said Richard Hunter, head of markets at Interactive Investor. “The fluctuating opinions surrounding demand from China following its reopening will continue, and there could also be bumps in the road should even a mild global recession ensue.”

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