Oil and gas producers are making billions while bills soar. Should governments tax them more?
The big oil companies - from the UK-based BP and Shell to international giants such as ExxonMobil and Norway’s Equinor - have been announcing astonishing profit figures.While they rake in the profits, people around the world are struggling to pay their energy bills and fill up their cars - leading to calls for higher taxes on these companies.Why has the oil price soared?
Oil prices had already been rising as economies reopened following Covid-19 lockdowns, and people needed more oil. So a sustained rise in oil and gas prices pushes up the cost of many other things we buy, driving the cost of living crisis that has gripped the UK - and other countries - in recent months.Oil companies make money by locating oil and gas reserves buried in rocks under the earth's surface, and drilling down to release them.
Some of the extra profits are paid to shareholders through higher dividends, and buying back shares . In some years, BP and Shell have paid no tax on UK operations, and received payments from the UK government instead. Politicians, environmentalists, trade unions and poverty campaigners have attacked oil companies’ record profits, and argued for higher windfall taxes.
, which produces more oil and gas in the UK than anyone else, is cutting jobs and reconsidering its UK investments because of the windfall tax.profits more heavily, they could potentially move their headquarters out of the country - escaping the new tax, and depriving the UK of much of the revenues they currently pay.Oil companies have to operate in a world where the price of oil can go down as well as up, with little warning.
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