UK prime minister Boris Johnson has dismissed calls from the opposition Labour Party to impose a windfall tax on oil company profits and use the extra revenue to help consumers struggling with rising energy bills.
"The net result of that would simply be to see the oil companies put their prices up yet higher," Johnson said today, adding that a windfall tax on profits would hamper efforts to reduce reliance on Russian oil and gas. "That is the way forward for this country, it is to take a sober, responsible approach and end our dependence on hydrocarbons altogether, and particularly Russian hydrocarbons," he said.
The Labour Party's proposal for a windfall tax comes as household energy bills soar on the back of steep increases in the price of oil and gas driven by uncertainty over Russian supply. Higher oil and gas prices helped Shell and BP, the two largest UK-based energy companies, rake in a respective $19.3bn and $12.8bn in profits last year, excluding inventory valuation effects and one-off items.
Earlier this week Paris-based energy watchdog the IEA suggested a windfall tax on utility company profits as part of a 10-point plan to end the EU's reliance on Russian hydrocarbons. "Temporary tax measures to raise rates on electricity companies' windfall profits could be considered," the IEA said. "These tax receipts should then be redistributed to electricity consumers to partially offset higher energy bills."
The IEA estimates that windfall levies, which it says have already been applied in Italy and Romania this year, could generate up to €200bn to help cushion the impact of high energy prices on vulnerable groups.
Johnson reiterated today that his government will issue its own energy independence plan "in the course of the next few days". The UK is already taking steps to curb its reliance on Russian energy, announcing yesterday a plan to phase out crude and oil product imports from Russia by the end of the year.
Shell said it plans to cease its involvement in "all Russian hydrocarbons" in a phased manner, starting with an immediate end to spot crude purchases. BP has stopped all new oil contracts or deals with Russian entities, including Russian-flagged vessels, Russian ports and Russian counterparties.
