Shell posts record $9.1 billion profit, as oil prices rise in first quarter

LONDON: Following a jump in oil prices, energy giant Shell reported record first-quarter earnings, increasing calls for the British government to slap a tax on energy corporations’ windfall revenues to help households struggling with rising living costs.

Shell said adjusted earnings increased to $9.1 billion from $3.2 billion in the same period last year, excluding one-time charges and variations in the value of inventory. Analysts had predicted $8.2 billion in revenue.

High oil and gas prices, owing in part to concerns about Russian supplies, are boosting big energy firms’ profits and driving global inflation. In the United Kingdom, where households are seeing the steepest reduction in living standards on record, calls have been made for a special tax on energy company profits to support consumers.

Prime Minister Boris Johnson rejected calls for a windfall gains tax on Wednesday, claiming that it would restrict investment in the UK at a time when the country is striving to diversify its energy business and enhance renewable energy output. However, following Shell’s earnings report, opposition parties increased their pressure.

The government’s “refusal to tax the super-profits of energy companies is completely unforgivable when people are too terrified to heat their homes,” said Ed Davey, leader of the Liberal Democrats. “This one-off levy would raise billions of pounds that could help vulnerable families with their energy bills now. It is a no-brainer.”

Brent crude, a global benchmark for oil prices, averaged $102.23 a barrel in the first quarter, up 67% over the same period the previous year.

After a 54 percent increase in household energy rates took effect on April 1, the British media is flooded with stories about people forced to miss meals or go into debt in order to keep their homes warm. Inflation increased to a 30-year high of 7% in March, even before those hikes.

BP, a Shell competitor, recorded its biggest quarterly profit in more than a decade on Tuesday. The London-based firm reported that adjusted earnings increased to $6.2 billion in the first quarter, up from $2.6 billion the year before.

Michael Hewson, chief market analyst at CMC Markets UK, called politicians’ calls for a windfall gains tax “grandstanding,” noting that Shell announced plans to invest $31 billion in renewable energy in the UK last month. This week, BP announced a $22.2 billion investment in UK energy.

“That’s a lot more than a windfall tax would raise and would probably be better spent,” Hewson said.

Shell announced on Thursday that it would take a $3.9 billion charge to cover the expense of abandoning its Russian investments, as it promised after the invasion of Ukraine.

The company’s first-quarter net income increased to $7.3 billion from $5.8 billion in the prior year’s quarter.

“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted,” CEO Ben van Beurden said in a statement. “We have been engaging with governments, our customers and suppliers to work through the challenging implications and provide support and solutions where we can.”

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