The FTSE 100 oil company said on Tuesday that its preferred profit measure, which it describes as underlying replacement cost profit, rose to $8.5bn (£6.9bn) between April and June. That’s up from $6.2 billion in the first quarter of the year and three times BP’s underlying earnings of $2.8 billion in the second quarter of 2021. BP’s first-quarter profits were already the highest for more than a decade. Rachel Reeves, the shadow chancellor, said the “brisk earnings” showed the government was “absolutely wrong” to give major tax breaks to oil companies. BP also said it would hand over $3.5 billion to investors through share buybacks, while it increased its total dividend payout by 10% to about $1.1 billion. Oil companies in the UK and beyond have enjoyed booming profits in recent months as energy prices have risen, even as households around the world struggle with soaring bills. As Russia’s incursion continues, some analysts have predicted that the UK’s annual energy bills could jump to £3,850 in winter, three times what they were paying at the start of 2022. Shell last week reported a record quarterly profit of almost £10bn in the April to June period, while British Gas owner Centrica made an operating profit of £1.3bn, most of which came from its drilling division oil and natural gas. Shell and France’s Total last week said they would also give shareholders billions of dollars in share buybacks and dividends. BP said its huge gains were driven by higher refining margins and “continued excellent oil trading performance”. The company was forced to write down the value of its Russian investments by $24 billion in the first quarter, but higher oil prices have made up much of the lost ground. Strong cash flows have allowed it to reduce its debt pile, further bolstering investors. Energy bills have been a major contributor to inflation, which has soared to a 40-year high of 9.4% in the UK. Several forecasters believe that inflation will move above 10% in the coming months. The UK government has belatedly responded to political pressure amid soaring energy prices with a surprise tax on the “extraordinary profits” of oil companies. However, the 25% tax, known as the Energy Profits Levy, came into effect before July 14, meaning it does not apply to BP’s or other oil companies’ second-quarter profits. Labour’s Reeves criticized the government for simultaneously giving oil companies 80% tax breaks for new investment that cut their taxes. He said Labor would use extra cash from scrapping tax breaks for a “green energy sprint” instead, as well as more home insulation to reduce energy use. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk “People are worried sick about energy prices going up again in the fall, but we’re still seeing impressive gains for oil and gas producers,” he said. “Labour argued for months for a windfall tax on these companies to help reduce the bills, but when the Tories finally came round, they decided to return billions of pounds to producers for tax breaks. This is completely wrong.” BP reports its own replacement cost profit metric to indicate its profitability before taking into account fluctuations in the value of the oil it has in storage.
