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Shell records the highest profits in 115 years; critics condemn that Rishi Sunak-led government has gone easy on the energy giants

Oil and gas giant Shell recorded the highest annual profits after Russia invaded Ukraine, which resulted in a surge in energy prices.

In 2022, the profits hit a total of 2.2 billion USD, estimated to be double last year’s total. In addition, the profits have accounted to be the highest in 115-year history.

Many energy and gas companies have visualized an increase in revenue after Russia’s invasion of Ukraine caused energy prices to surge. It has imposed pressures on firms to pay more taxes as the households cope with the rising bills.

Opposition parties have stated that Shell’sincrease in profits is outrageous, and the government has left the company on the hook. In addition, they have opined that the price cap on energy prices must be eradicated.

After the normalization of the covid-19 pandemic, energy prices have begun to increase tremendously, and have sharply increased during the last year as the war in Ukraine resulted in tension for supplies.

windfall tax

The invasion has resulted in a subsequent increase in Brent crude oil prices, accounting for 128 USD per barrel, but the prices have been reduced to 83 USD. Furthermore, gas prices have increased drastically, but the costs have plummeted over time.

The situation has yielded high profits for the companies. But, it has even resulted in an overbearing burden among households and businesses as they struggled to pay their energy bills.

The energy companies like Shell’s outrageous profits have caused fuel prices to hike; windfall taxes must be imposed by the U.K government:

India lowers its windfall oil tax to Rs 10,500 per tonne.

The previous year marked the imposition of Windfall taxes by the U.K. government, which was also known as the Energy profits Levy. The latter is a tax enjoyed by a company or a group of companies after they reap the benefits that have taken place in something beyond their control.

It has been evident that energy companies are gaining the most from the windfall taxes followed by the pandemic and Russia’s invasion of Ukraine.

The shadow secretary for State and Climate Change, Ed Miliband, has stated that as the British are struggling because of the increasing fuel hike at 40 percent in April, the Government is letting giant fuel companies earn higher profits allowing them to let go of the hook by not imposing a proper windfall tax. The Union has decided to prevent energy prices from hiking further in April.

Previously, he condemned the act of the government to impose windfall taxes to bring down the bills of households and businesses. They believe that taxes are necessary so that big oil companies do not utilize the profits charged by hiking fuel prices for the people.

Furthermore, the profits acquired by the energy giant were seriously questioned and condemned, addressing the common men stating that energy companies’ outrageous profits have caused fuel prices to hike.

Despite the move by the U.K led government, Shell has stated that it did not expect to pay any taxes this year as the company has been allowed to offset the decommissioning costs and investments made in the UK-based projects against any profits.

Shell

Shell has further revealed that it has to pay 134 million USD to the UK government for the windfall taxes in 2022 and pay more than 500 million in 2023.

The valuations paid as taxes may be considered negligible compared to the massive revenues earned by the company. However, Shell derives only 5 percent of its revenue from the UK and utilizes the crucial part for operating their companies in other jurisdictions.

However, many critics have stated that Shell is a UK-based company and has been paying a major portion to its shareholders rather than investing in renewable sources of energy.

The criticisms have caused Rishi Sunak and Jeremy Hunt to increase the taxes on the profits made by the energy companies.

The government has further asserted that they would be ready to take authority if the decreasing wholesale energy prices are not reflected as the lowest prices in the petrol pump. However, they have not yet revealed any specific initiative.

Presently, the UK government is controlling the utility of energy and gas bills so that a typical household does not have to spend more than 2500 pounds a year. However, the spending is considered double the value of what was charged before the Russian war on Ukraine.

The windfall taxes imposed by the government only accounts for 25 percent of the profits of energy companies like Shell, but it has been significantly increased to 35 percent. At the same time, oil and gas companies have to pay other kinds of taxes, such as corporation taxes contributing to 30 percent and 10 percent supplementary taxes.

However, the companies have tried to reduce taxes by paying on factors such as decommissioning the oil platforms in the Northern Sea. It implies that energy giants such as Shell and BP have paid little taxes in the UK despite accumulating higher profits.

Edited by Prakriti Arora

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