Social Justice

Why are BP profits so high in the cost of living crisis? We asked experts

BP profits hit $5billion (£4bn) in the first three months of 2023. How is the company making so much money in the cost of living crisis?

bp

BP has announced record profits in its latest update. Image: Unsplash

As millions of people in the UK are going hungry and struggling to pay their energy bills, oil giant BP is raking in the profits.

The company’s profits hit $5billion (£4bn) in the first three months of 2023. This was down slightly from record profits of $6.2bn last year.

Joseph Evans, researcher at IPPR, said: “BP continues to profit from the cost of living crisis. While some UK households spent the winter facing the bleak choice between heating or eating, BP continued to exploit geopolitical fallout from war in Ukraine – driving up prices and profits.”

The cost of living crisis is international but has hit the UK hardest among the world’s richer countries, with the IMF estimating that Britain is set to be the only major economy to shrink in 2023. 

Inflation has hit heights not seen in decades. Prices are, on average, 10 per cent higher than they were a year ago and the cost of many essential food products has risen even faster. Energy bills are double what they were at the beginning of last year. 

People are facing horrific battles to afford their bills. A struggling single father previously told the Big Issue: “I’m scared to put the heating on because at this rate it means I won’t be able to pay my rent and we’ll end up homeless.” 

Meanwhile, the chief executive of BP said: “This has been a quarter of strong performance and strategic delivery as we continue to focus on safe and reliable operations.”

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“Instead of using these profits to invest in net-zero or reduce costs for consumers, BP is transferring an outrageous sum of wealth from ordinary households to their investors,” Evans added. “The USA and Canada have already taken action on excessive shareholder payouts: it’s long overdue for the government to follow suit by introducing a tax on share buyback schemes.”

So why are profits so high? And is there anything, realistically, that can be done to redress the balance? The Big Issue previously asked experts to explain why BP is profiting, while the cost of living soars for everyone else. 

Dr Mari Martiskainen, a professor of energy and society at the University of Sussex, said: “BP profits are going up as the company is profiting from soaring oil and gas prices due to the Russian war on Ukraine. As less Russian oil and gas reach the markets, prices go up, which then increases profits for suppliers like BP. But they also profit from trading in volatile oil and gas markets.”

BP has previously said its profits are going to be invested in green energy projects “focusing on solar growth and aiming to become a leader in offshore wind”. 

“BP’s exorbitant profits are the result of fundamentally broken markets,” Dr Marie Claire Brisbois, a senior lecturer in energy policy at the University of Sussex, previously told The Big Issue. “Despite the widespread social harm caused by the cost of living crisis, BP has legal incentives to maximise their profits so they can hand out returns to mostly wealthy shareholders. 

“Government has been conservative in taxing away these excess profits, partly because they want BP to keep investing in UK gas development – despite the fact that renewables can provide, by far, the cheapest possible energy. 

“On top of that, poor design of energy markets in the UK means that when gas prices are high, electricity prices are inflated, even though the actual cost of electricity is currently much lower than that of gas.

“The simplest way out of this crisis is a massive investment in subsidies and programs for home energy retrofits for all households, and a rapid buildout of renewable energy. We need to help citizens use less energy, and we need what we do use to be cheaper and cleaner. 

“Energy markets also need to be reformed as soon as possible to untether the price of electricity from that of gas. More broadly, policy action should be taken to cap corporate profits, so that large oil companies can’t fuel a surge in profits for the wealthy at the expense of regular citizens.”

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