Research

Mass support for windfall tax on oil and gas companies

More than three-quarters of people want a windfall tax on fossil fuel companies, according to a national survey published today.

The poll, by YouGov for Friends of the Earth, found that 76% supported the use of oil and gas company profits to help families struggling with energy bills.

Friends of the Earth said money from a windfall tax should be used as a one-off payment to people most affected by rising oil and gas prices.

In the long run, it could also help install insulation in Britain’s energy-inefficient housing, reducing future bills, the organisation said.

It said the tax would apply to all North Sea oil and gas producers, which include BP and Shell.

BP reported a $12.8 billion profit for 2021, an eight-year high, while Shell had annual profits of $19.3 billion.

Gas prices for a typical UK family will go up £693 a year in April, a 54% increase.

Jamie Peters, director of campaigns for Friends of the Earth, said:  

“People rightly worried about how they are going to afford energy bills have looked at these excessive profits from the oil and gas giants in disbelief.

“When the choice for thousands across the nation is between eating or heating, we have to question how this is acceptable.

“Channelling some of those obscene profits into making energy bills more affordable would make a world of difference to people’s lives. It’s no wonder the public are demanding a windfall tax to fund much needed protection for those most at risk of soaring bills.

“The increases in fuel bills are caused by a global spike in gas prices, which is being passed on to households because of our reliance on gas.

“We need to stop exploiting the earth’s resources and get off expensive, damaging gas once and for all by investing in a massive programme of renewable energy and home insulation.”

Senior oil and gas executives have promised to spend more on low-carbon alternatives to oil and gas, including windfarms, hydrogen and electric vehicle charging points.

But the International Energy Agency (IEA) said investment in clean energy by oil and gas companies was only about 1% of capital expenditure in 2020.

Connor Schwartz, climate lead at Friends of the Earth, told the Guardian last week:

“It’s clear that oil and gas companies don’t intend to divert their eye-wateringly excessive profits to fund the green transition we need.

“They have no profit-based reason to do this, because drilling for oil and gas is more lucrative than investing in cheap, green energy.

“This is partly due to government handouts in the form of subsidies and tax breaks, which reward huge multinationals for exacerbating climate breakdown instead of penalising them.”

At the weekend, a letter to Boris Johnson by about 30 MP, many from the Net Zero Scrutiny Group, said a lifting the moratorium on fracking would help the energy price crisis.

The letter, reported by the Telegraph, said shale gas fracking would “allow us to combat the cost of living crisis, level up, create jobs, opportunity and a renewed sense of community in the north, improve our energy security, reduce our reliance on imported gas, stabilise energy prices and achieve net zero without increasing the cost of living for already hard-pressed working families.”

The energy commentator, Richard Black, reported that in the past three months for which data is available (September-November 2021), the UK exported 31,975 GWh of gas – about double the amount in 2020 and just under double the figures from 2019 and 2018.

He said this was “utterly normal corporate behaviour and completely to be expected”. The gas, he said, belonged to the company that extracted it, not to the UK:

“Fracking wouldn’t change this. Nor would increasing North Sea production, were that even feasible. Unless you want to argue for state ownership of the gas produced, it will always get sold where the profit margin is biggest and energy security wil always depend on UK companies (not the government) paying the market price”.

  • The YouGov survey for Friends of the Earth was carried out online on 10-11 February 2022. The total sample size was 1,771 adults.

19 replies »

  1. The oil and gas in the ground belongs to the state (nominally the Crown m’thinks) not to any company, apart from one tiny oilfield owned by the Duke of Devonshire at the time of nationalisation of all the rest in the onshore United Kingdom.

    The government (State) decides upon a licensing system for onshore oil and gas exploration. Foolishly IMO the government fails to insist on a Production-Sharing-Contract PSC whereby the State takes a chunk of the gas and/or oil produced. With the wisdom of hindsight, if the Conservative government had done that, then we could get a share of the production of oil and gas at zero cost, and the Government could then pass the benefits to surrounding communities.

    Instead, the tax by the government is peanuts and the oil and gas is sold at world prices.
    Even if Cuadrilla had found a huge gasfield, then it would all be sold at world prices.

    From the UK consumer point of view, just money to burn, nothing for the local communities and peanuts for the Treasury.

    Robin Grayson MSc FGS
    Geological adviser, Liberal Democrats

    • robin

      I see that in 1966 United Kingdom general election was held on 31 March 1966. The result was a landslide victory for the Labour Party led by incumbent Prime Minister Harold Wilson. Harold did not put a production sharing agreement in place for the new offshore gas industry.

      The peak of the UK offshore oil and gas industry was 1985 – 2001 with a conservative government, followed by many years of a labour government.

      I am not so sure if the present government would change the system – unchanged since the Wilson Government , which is that the government take a chunk of the production in terms of cash. The clever governments, rather than sharing the production, share the income and get the operator to sell their product and take their cut in the form of cash, which they can then spend as they wish.

      Only the NCB kept all the production for the government, and that story is available for all to see (it was not a money spinner for the exchequer as it turned out )

      At some times in the past up to 99% of the o&g production was sold and the cash handed to the government (of whichever hue it was at the time). It was those peanut economics that drove the Scottish Independence dreams of happy days to come I guess.

      Now that the N Sea is a high cost lower production regime, then those happy days for the exchequer have gone. Indeed the gov has taken tax early.

      The gov should now bend its mind to putting a windfall tax on onshore and offshore wind as well as house mounted solar to claw back the obscene profits being made in the renewable sector, especially those who got in early and are reaping the whirlwind so to speak?

      Maybe if the SNP went for production sharing, they would keep their half in the ground?

      https://www.gov.uk/government/statistics/government-revenues-from-uk-oil-and-gas-production–2/statistics-of-government-revenues-from-uk-oil-and-gas-production-july-2021#:~:text=Revenues%20from%20oil%20and%20gas%20production%20peaked%20in%20tax%20year,1985%20until%202020%20to%202021.

      • hewes62:

        I watched the debate about the windfall tax in HoC. It was trashed and soundly trashed, with the SNP leading the way.

        Seems now it is okay to suggest a stupid idea, have it trashed, but accept the media will ignore the trashing to create a story.

        More of that independent journalism. But, it does not have to mean it is a responsible or coherent idea. Hysteria seems to be saleable.

        • Martin

          Indeed, hysteria is the norm. I await a DoD report on BP and Shell Profits from UK operations (not global) and who is the largest oil and gas producer in the UK. If all the countries in which BP and Shell operate take their cut, will it leave enough to insulate the UK for years to come?

          Meanwhile, having advised councils to divest themselves of oil industry shares, the commentators are now on bended knee to them for cash, but not for pension funds of course.

          Strange days – but they will not last forever.

          • Wonder if the UK energy user has yet paid the money to BP for their loss in 2020?? Yes, some support to keep jobs going, but nowhere near the losses made.

            There are some very short memories on this site, and elsewhere.

            I would just add that I used my car last Friday am, and the traffic was akin to a past Bank Holiday. Presumably, pre half term shopping, and even a queue at the fuel pumps out onto the road. Indeed, strange days, or simply days gone by returning.

            • Martin

              No mention of BP losses or the pledge to support Scottish Wind power (with hard cash ). Yesterdays news is for wrapping chips, although I wish it were, as the take away in the village results in lots of plastic waste around the place. A windfall tax on take always is in order I guess, although the litter bags are plastic – and see though. The county council have run out of them, maybe paper bags will turn up next, or hessian sacks.

              Another litter pick to get the vodka bottles, plastic, chips and (closer to the pub) broken glass has yielded results.

              Meanwhile the traffic roars along on the A57, as it was prior to coronavirus, and those who are voting for a windfall tax, are opposing solar panels (they do not look nice) or worrying about UK food production as we look over fields of turf and beans for export and bio fuel.

    • Interestingly the US energy costs have increased significantly this winter and many Americans are also experiencing fuel poverty and sadly having to make a choice between eating and heating.

      “Fuel oil is nearly 60% more expensive than last year, electricity is up 6.5%, and natural gas rose by more than 25%.”

      https://www.cnbc.com/2021/12/23/20percent-of-americans-couldnt-pay-their-energy-bill-in-the-last-year.html

      Clearly the global rise in gas prices is a major concern for the U.K., given so many homes are heated by gas and gas is of course used to generate electricity too.

      It is interesting to see how energy bills are broken down, the main cost being the cost of wholesale gas followed by network and billing costs, not all down to policy costs and environment schemes as some have recently intimated in the media.

      https://www.bbc.co.uk/news/business-58090533

      It seems that we still spend more to support fossil fuels in the U.K. than renewable energy

      https://www.bbc.co.uk/news/59233799

      It is to be hoped that well thought out schemes to make buildings more energy efficient and better insulated are introduced as this will cut energy costs as well as reducing energy consumption, whichever type of energy is being used.

      https://www.theguardian.com/environment/2022/jan/28/green-energy-measures-saving-households-money-analysis-shows

      • Kat

        I do not see that the UK is subsidising fossil fuel more than renewables in the BBC bit – although it clearly shows the main subsidy is at the point of consumption, not to the producers. I do not thin this is an issue for UK private transport. Maybe industry and agriculture are not taxed enough by the gov?

        A piece on the subsidy to renewables (tho I note it says offering)

        https://www.electropages.com/blog/2021/09/uk-government-offering-265m-renewable-energy-subsidies#:~:text=UK%20Government%20%C2%A3265m%20renewable%20energy%20subsidies&text=%C2%A355m%20will%20be%20provided,on%20the%20economy%20in%20general.

        A piece that notes the subsidy (tax breaks for new development, tho the largest bit is for decommissioning)

        https://news.sky.com/story/climate-change-uk-government-oil-and-gas-subsidies-hit-13-6bn-since-paris-agreement-campaigners-say-12477295

      • Oh, I think the USA has a long way to go before they have any issue with heating and eating, KatT!! Yes, their cost of living is rising, but in terms of heating and eating from a much lower baseline. Wasn’t Biden supposed to sort out the disadvantaged and support them? How’s that going?
        Perhaps if the numbers of US drilling rigs keep going up and exports of LNG likewise he will be able to transfer some of the revenue donated by the UK to the US disadvantaged. Hmm, I spot a flaw. As UK have spent that money helping out US disadvantaged, who is going to pay for UK’s disadvantaged? Perhaps some foreign aid?

        Strangely, every one I know in UK has already done all the insulation and energy saving available to them. No energy consumption reduction or cut in energy costs for them. But, Mrs. C bought a new cardigan yesterday! That should make all the difference.

        • Just quoting from the article Martin, it states they are struggling too. Perhaps you need to take it up with the US news providers.

          Hope Mrs C likes her new cardigan 🙂

          • There have always been those who struggle in USA, KatT. It is a country where success is rewarded, and those who don’t enjoy success find it particularly difficult. Ironically, and worryingly, less struggled during WW2, as their industry output mopped up many who had previously struggled and introduced health care and all sorts of other benefits. Now, there are those $60k/year washing up jobs for those who wish to wash dishes for the frackers! Good job too, “we” need them to avoid salmonella over there so they can keep us supplied over here. Such is (lack of) progress. Not to worry, UK is great at process.

            Mrs. C does indeed enjoy her new cardigan, but unfortunately her health is currently not good and she requires a lot of energy to be used to keep her warm, in addition to her new cardigan. Millions more in the UK who have similar issues, and are not convinced that paying high green energy premiums is such a brave new world, or that food prices are rising as cereal is turned into fuel and causing price pressure upon food based upon cereal, like bread, and animal protein, where cereals are one of the major feed ingredients. Don’t see any apologies for those sort of impacts from those who have been the siren voices calling for the policies that have resulted in the impacts. And, sorry, but she is quite appreciative of the plastic tubing that has kept her alive. Collateral damage is not a term she would find too amusing.

            The US news providers? The home of ….fake news! You are surely joking. They are what “we” will “enjoy” in a few years time, and their impact in changing UK news reporting to a competition with the Internet is already all too evident. M&S trying to compete with Primark again. The consumer is the loser.

            My answer? Avoid a Smart meter. Why worry yourself into an early grave.

  2. In sum then, fracking would be pointless from the energy security point of view, and that’s without consideration of the only real argument, the inevitable effects on the planet.

    • No, 1720. Problems with arithmetic again. That is not a sum. It is a single opinion.

      The inevitable effects upon the planet are that ship loads of LNG are and will puff across the Atlantic. So, fracking will increase, transport emissions will increase and the inevitable effects on the planet will increase. Unintended or uninformed consequences?

      What has been conveniently missed from the recent debate upon this subject is one of the considerations raised was to reposition energy security for UK by addressing the issue of export of gas and oil and UK energy security. So, the current situation is open to being modified. Without that local supply, it is not.

  3. No, the money taken in tax is NOT peanuts. £billions have been taken in tax from the N.Sea. What has been done with that tax is another matter. In the case of the UK it was against the backdrop of a nation bankrupt after WW2, and seen as the economic basket case within Europe.

    So, some people want someone else to pay for their energy. Shock/horror. Many people want to win the lottery every week.

    There are too many politicians who should know something about economics who do not, or just pander to easy but stupid populist suggestions.

    Anyone seen an impact assessment for a windfall tax?? Nope. It has not been done and for good reason.

    What an infantile approach. “We” think this is a good idea, but “we” have not even bothered to calculate the consequences. It is not too difficult to look into that. For starters, it would push the price of oil and gas higher still. When the issue is demand being greater than supply then any move that restricts companies ability to increase supply is not only daft but irresponsible. It would also reduce investment into renewables. No need to go any further.

    Usual suspects exposing their inability to respect the intellect of the voters. And, typically Liberal Dem., the policy on N.Sea taxation has been supported by Tories, Labour and Lib. Dem, when they had their hands upon the reins, yet suddenly it was a Conservative government wot did it! OMG. As for Connor, if that is the best nonsense he can produce, heaven help us all. Does he not consider the millions who pay energy bills and can and do observe their green levies ie. SUBIDIES upon renewables?

    This is deflection being attempted by the anti fossil fuel lobby in an attempt to try and create a fake world. The price of oil and gas currently is simply a reflection that the world economy still relies upon the supply of oil and gas and will for many decades. That supply needs to be maintained until alternatives are in place and the current situation exposes that is a long way off. Sorry FoE, but that is the reality and however much of a smokescreen you try and produce it will be seen through. All at a time where Nord Stream 2 could be stopped and the consequences to Europe gas supplies and pricing. And, before the next bit of the smokescreen is added, the fossil fuel companies are indeed investing large amounts in alternatives in the UK, and so is the Government ie. the tax payer, but it takes many decades to change energy policy and supply. If anyone has any difficulty seeing that, then perhaps just concentrate on one part-how long before Sizewell C will be up and running? Perhaps FoE will explain how nuclear waste will be managed which will be a consequence of renewables? Probably not. Just protest against it and rattle some more tins.

    I suspect if a survey was done about whether energy users would like the green levies removed (and not just moved) to make their energy bills cheaper there would also be mass support.

  4. A poll by FOE, so anyone linked, associated and receiving false information on the UK energy industry without a counter argument regarding a windfall tax, but are we just discriminating one industry, while others flout paying their fair share; remember we all need energy the same as we all need housing, insulated and warm in the UK winters, but we are still building insufficient no alternatives to electricity, oil and gas heating!!
    Wood will be outlawed next then we are up the creek literally!!
    Interesting article I read today, come on DoD keep up!!
    https://www.dailymail.co.uk/news/article-10508847/amp/Fracking-bosses-call-ban-projects-lifted-bid-help-ease-energy-crisis.html

  5. Yes, DorD, keep up ….with the Daily Mail!
    “ Fracking bosses have slammed the Government’s ‘perverse’ double standards as Britain battles the energy crisis.” (Daily Mail)

    It’s time the Government slammed the fracking bosses’ double standards as Britain – ( fortunately nowhere else in the world) – battles the energy crisis.

    The price of freedom is eternal vigilance. (Churchill) Watch how the proved accusations of deflection levelled at the polluters are being used to discredit, unproven and unsubstantiated, to sow doubt in the minds of those who seek to protect the planet for our children and grandchildren.

    Be aware!

  6. So, battling an energy crisis is not happening anywhere else in the world! Bless. Fracking is not happening anywhere else in the world? Bless again.

    So many facts need changing. The pieces will fit in the jigsaw if a hammer is used.

    Be aware of those who post discredited, unproven and unsubstantiated comments. When that is resorted to, it is suggested that credible, proven and substantiated arguments are not available. Actually, they are, but they require a bit of research. A good advertisement for the “we’s”?

    Nope. Maybe those fossil fuel companies are more astute in their PR than they are given credit for.

  7. While there is mass support in a small section of the community for a windfall tax on the oil and gas industries global profits, there is a report by the Energy and Climate Insight Team, which notes that the British public are of the opinion that the high gas prices are due to

    Profiteering 34% (I am not sure how this pans out – but Norway must be doing well – can we tax them?)
    Russia 29% (Squeezing supply and so forth to Europe, not the UK of course)
    Higher Demand 28% (Or less availability)
    Coronavirus 18% (Upsetting production / delay in new fields coming on stream and so forth)
    Green Levies 13%

    In the DoD school of Maths, that means 70% of the public do not think the present situation is due to profiteering (it adds up to 112%, so its a rough number). But then, a tax on something else is always a winner I guess, unless you are relying on dividend payments to fund your heating and food.

    https://eciu.net/insights/2022/british-public-say-key-drivers-of-gas-crisis-are-profiteering-russia-and-global-demand

  8. The full report on energy trends within the UK as we move out of the pandemic make for interesting reading and are not quite what some energy commentators would make out.

    Comments on the “global” price of gas are also interesting, given that gas is normally traded on regional hubs and information available showing that gas on the Henry hub (USA) is roughly 6 times cheaper than gas trading on the NBP (UK)

    https://t.co/FvOu1TpLY4

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