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>Reported record annual profits after oil and gas prices surged last year following Russia's invasion of Ukraine.
I'm surprised by how short termed is the strategy to actually keep up with 'market' prices. (which they don't have to do, as their workforce and costs are basically staying the same, hence a hike in price increases profits)
They make higher profit now. But how much demand destruction will happen in the long term ?
I myself just got an ebike to commute, which comes with a nearly 100% reduction in energy use. And I'm not alone. There isn't any traffic jam anymore to commute to where I work, because remote working is becoming widespread (first because of covid, and now gas prices), so much fewer drivers are using their cars.
The local government has eventually passed laws to require landlords to properly thermally insulate homes (within a decade)
Trains were scheduled again, and became popular. I no longer hear about someone driving across the country. They would just get a train (which also comes with huge energy savings)
I'm surprised because the current hike isn't even fueling demand for EVs (as recharging your EV is now as expensive as getting a full tank in public spots)
Ppl are just shifting away from cars and some energy intensive usages, this time.
Totally agree.
Unfortunately, it's not as clean cut everywhere.
Despite high fuel prices, it's still cheaper for me to drive from northern England to London (where my office is) than to get a train, even allowing for a nominal "maintenance" allowance for my car.
I don't do it because it is at best double the travel time, and at worst I've had the drive take 6x or more.
When I need to travel there with my wife and children I'll drive every time, because the train prices are just ridiculous.
I suppose it's a similar greed with our train operators with poor service and high prices, but it has almost always been this way in the UK since privatisation.
I use e-scooter rentals to get to and from the station now though; rentals because for some reason we're not allowed to own and ride them, we have to rent them; some catching up of our regulations to be had there.
Working from home though, I don't need to use any transport at all 5 days of the week, just need to deal with an energy bill more costly to keep warm than it would cost to travel to the office by train every day...
Yep £130 return to London from Glasgow or Edinburgh by car for four people. You might get less than £100 return on the train for one adult if you book 2 months ahead and don’t travel in the school holidays or when there’s a gig or a football match on. Last time I looked it was over £400 return for my family. You can’t tax cars to make them cost as much as transporting 4 people by train; that would strangle the economy. The government has to make running the trains more efficient and subsidise them properly. One glaring example; why is HS2 costing something like 5x more per km compared to French costs.
> Despite high fuel prices, it's still cheaper for me to drive from northern England to London (where my office is) than to get a train, even allowing for a nominal "maintenance" allowance for my car.
I can second how bad this situation is and how it's been bad for a long time.
In 2021, it was cheaper (half the price) for me to drive my fiancee and I to Liverpool and back than it was for just the train tickets. That's not even factoring in the extras like the transport to/from the train stations. In 2023, with trains becoming appallingly unreliable before the strikes, I can't blame anyone for decided to drive.
It's unfortunately clear that the current UK government has no interest in tackling the climate crisis or the long-term effects on the economy.
It's definitely not cheaper or more convenient for me to drive into Edinburgh from Fife - the train is pretty convenient and not too expensive (£15 return). But that's a relatively short journey.
Going down to the east coast mainline isn't too bad, the the west coast mainline is horrific and I try to avoid at all costs.
I don't mind flying but I hate airports and you often have to get a train at the other end anyway - don't think I'll ever travel on Southern again if I can possibly avoid it, they are actually worse that Avanti West Coast, which I didn't think was possible.
It wouldn't be cheaper to drive if your government properly taxed the petrol and road usage to help pay for and offset the environmental damage your transportation choice caused, would it?
I saw a chart showing cost vs carbon for different travel modes, trains had a huge cost to carbon ratio compared to cars, which are basically heavily subsidised. In the UK there's an idea that trains should be self sufficient (not that they are) but for some reasons cars get a free pass.
> Despite high fuel prices, it's still cheaper for me to drive from northern England to London
I assume you calculate all the costs of car usage, not just the fuel?
> I'm surprised by how short termed is the strategy to actually keep up with 'market' prices.
It's supply and demand in action. Each oil company has limited capacity of production and not much flexibility to increase it in short term. As part of the supply is no longer available, there is less oil available in the market. The market mechanism drives the price up to a level where supply and demand are in balance. So the migration of oil consumers to alternatives is exactly what's supposed to happen in this case.
Moreover, a single company does not have a real choice to sell for cheap. First everyone would choose this vendor for their oil needs. But as their stock and production is limited, they would soon run out of oil to sell. Even a cartel or government decision to lower the price does not cut it, because it kills the demand side incentive to find alternatives. Then you'd be in a situation where oil is cheap, but not available.
Yeah, it's just that people are unlikely to realise this because the British press has spent the last year or so lying about this for both partisan reasons (most of them hate the party currently in power) and environmentalist ones (there's been a huge campaign to block new fossil fuel production in order to fight global warming which relies on convincing people that the only reason governments haven't done so is because it'd hurt fossil fuel company profits - admitting that it'd actually increase their profits and make ordinary people worse off would get in the way of that).
>a single company does not have a real choice to sell for cheap. First everyone would choose this vendor for their oil needs. But as their stock and production is limited, they would soon run out of oil to sell.
that's exactly a publicity stunt that made Total, in France, for a few weeks after their huge profits hit the news. It turned out to be beneficial for them :
It improved their image among citizens. And they avoided that tax on extra profits, that BP will have to pay in the UK. They even had news credit for this. After that stunt, they could go to the media and show everything they were 'doing' for industries, consumers, and investments against climate change.
Now the gas is back to expensive levels. But voters got gradually used to it, demand didn't break, and Total still dodged the tax and escaped more regulation.
BP used high oil prices to do stock buyback, Total used it to build their image as a 'socially responsible' and stable company.
(Btw, the shortage of fuel happened during strikes and other defiance on the government. So Total got away with being dry some of the time. The government somehow ended up being blamed for that.)
Now choose where you want to invest. It's fully up to your strategy.
They'll invest the huge profits into EV battery factories, EV charging stations, renewable energy startups, etc.
BT, Shell, etc. have already given up on oil and gas. They don't invest in new refineries, pipelines, drilling rigs.
Just checking the wires ... BP unveils fourth share buyback of 2022 ... nahh that was last year ... ahh there it is ... BP profits surge to record $27bn, unveils extra $2.75bn share buyback and a 10% increase in the dividend.
I guess if your shareholders are buying a Tesla that is, indirectly, investing in EV battery factories, EV charging stations.
> their workforce and costs are basically staying the same
You sure about that? they use massive amounts of energy themselves, all of which is much more expensive. Labor costs are way up among nearly all wage-based occupations (and if BP doesn't keep up, their employees will jump ship to competitors). Transporting gasoline to every street corner on multiple continents, more expensive. Taxes -- as the article indicated, huge new levies have been recently introduced. New regulations all over the globe add enormous amounts of red tape, or make certain operations impossible to build or operate, all of which pushes capital costs higher. Rising interest rates makes their borrowing costs higher.
Each company is motivated to take the profits now while they can, even though a cartel approach would be better in the long term.
It's like a positive example of a tragedy of the commons and short term corporate thinking.
I would not call it short termed but rather within the realm of possibility for BP. Oil&Gas are inelastic and with small fluctuations in supply or demand the price varies strongly. In 2020, we even saw negative prices in Ohio and last year prices >100$USD/bbl. OPEC has some room when it comes to increasing it's output, but I think BP, Shell, Equinor, etc. are already at max production. Adding more production takes a lot of time and heavy investment and has
hugh payback time.
> They make higher profit now. But how much demand destruction will happen in the long term ?
That's not something they can control.
The only thing they can do to future-proof themselves is to invest in renewables and hydrogen, and they appear to be doing that [1]
https://www.cnbc.com/2022/06/15/bp-buys-40point5percent-stak...
Can you imagine if they didn't follow market pricing and kept their pricing way below everyone else's? They would sell out of oil in a heartbeat including future contracts and chaos would ensue, it would be the end of that company then everyone would go back to paying market rates to everyone else 10 minutes later (buying BP's carcass shortly after that). It would need global co-operation to fix oil pricing which currently doesn't exist.
> which they don't have to do
Do you want your power turned off? No gas for your car?
The buyers are the ones that bid up the price of oil, not BP.
Maybe they are assuming the demand destruction is coming anyway? CO2-saving measures measures and the work from home trend would reduce long-term demand for fuel anyway. So they might have seen the chance to grab some profit while they still can.
Oil is used everywhere. Everything today is made from plastic, or is wrapped in plastic. Also, as prosperity grows, so does tourism. Tourism = flights. EV trucks are far from ideal. So do EV pick-ups. Even when there'll a huge shift toward EVs, the world is going to need lots of oil in upcoming decades.
And honestly, I would be happier if BP shareholders get richer than Middle East sheiks, and Putin's friends.
> I would be happier if BP shareholders get richer than ..
Because things went so well with the British East India Company and the United Dutch East India Company?
Rich companies screw over poorer countries to extract resources via dubious deals and shady military actions regardless of their origins - they're just less visible when when they're from your neck of the woods and nice to your circle of people.
Still, those nasty Saudi's in Yemen right? Killing innocents with, wait, where'd they get those weapons from?
It’s because the ruling class’ actual objective was arresting mobility and social interaction and potential for organizing.
It bothers me sometimes that people seem to simply ignore, tolerate, and make excuses for the abuses like some kind of abused wife.
While many people not only bend over backwards to curtail their life in a belief of salvation, the same ruling class that has psychologically abused a certain segment of the population into their new form of religion, jet around in private planes between several of their mansions and from one energy intensive event to another to discuss how the peasants should not be able to use energy As they pile the wealth of the working people who produce the value.
I wish more people had an understanding that we are sliding back into an aristocratic type system by way of a typical trap pattern. Being reliant on electricity and public transportation means you are totally dependent on and can be totally controlled by the ruling class. Have you exalted the virtues of your rulers sufficiently today, peasant? Maybe you do not get to charger your bike and definitely do not get to ride the public transportation system.
People are not shifting away from anything, they’re being herded into a trap and into a system of dependence, immobility, and control.
The cool thing about train tracks is that they're still there even after the cake has been eaten.
Your analysis is interesting but the material condition improvement of building public transit supersedes it, and furthermore, the existence of public transit doesn't prevent any form of revolution. Unless we all have jeeps and dirtbikes, the government can still stop movement by dropping bollards onto highways. Done.
So I don't think building public transit furthers the enslavement of the working class, rather the opposite, it's an example of us wrestling something we need from a bourgeois that really couldn't care less, cause as you say they'll just take a helicopter.
>Maybe you do not get to charger your bike
Well, that's a bike. It has pedals.
I ran out of battery more than once when testing the calibration of the battery gauge. And I could literally cycle back home. I don't even used the electrical assistance on most of my trips. It's there, but you use it when you want.
It's better than a car, which dependent on fuel. Petrol has to be provided by what you call "the ruling class". (unless you dig yourself in the desert)
Also, politicians who wanted to get more powerful (like Thacher) used to just get rid of the public transportation and services. Because of strikes. As people are heavily reliant on the public transportation in here, strikes are a powerful political tool against the "aristocratic type system".
Lastly, I still have a car. I use it when I feel like using it, or to go on trips to burn a part of the money I saved after using a bike.
You describe persons who are dependent on cars.
But maybe this petrol-availability crisis can teach us to no longer be dependent on petrol. Cheap and easily available oil is over.
They booked loses of ~25bn on Russian projects on the way to making a profit of 27bn for the year.
Guessing the accountants wrote down everything else they could to keep the headline number as low as possible.
> biggest profit in 114 year history
I hate stats like this. Of course it's the biggest ever, there is more money in circulation than ever before.
You see this in politics a lot, a classic from the Teresa May era was "there are more kids going to schools rated Good by Ofsted than ever before." There are more kids alive than ever before, so it's not much of an achievement is it.
Can you explain then why our private bank accounts didn't see the biggest annual growth ever? There is more money in circulation than ever before!
Most metrics do actually go up right now because of the massive inflation and the massive amount of money that was printed with the stimulus. I wouldn't argue that people are " richer" because they're purchasing power has been massively eroded, but across the board the numbers have went up technically.
I don't agree with the orginal statement because increased revenue doesn't necessarily equal profit but a simple explanation to your question is that the amount of humans increase. This results in increased demand bur doesn't mean that every person gets more. Similar how GDP has been increasing in Sweden for a long time but GDP per capita hasn't.
It did? Personal savings has the same "covid spike" in the graph as many other metrics do.
Inflation is designed to steal your money in a way other than taxation.
> Of course it's the biggest ever, there is more money in circulation than ever before.
Did the amount of money in circulation double like their profits did?
No, it went up 500X (USD, 1923-2023).
What I mean is that telling me in the headline that it's their biggest profit in 114 years does not mean anything to me, it doesn't give me any scale of the achievement, because lots of things today are much bigger than any time in the last 114 years: population, money circulation, GDP/GNI, resources consumed
The final sentence in my comment makes this quite clear, I think.
> The company's profits more than doubled to $27.7bn (£23bn) in 2022, as energy prices soared after Russia invaded Ukraine.
Ah, the 34th Rule of Acquisition: War is good for business.
All while we are trying to get away from fossile fuels. At least superficially there is a mismatch here, between the profits and some perceived Zeitgeist.
Does BP do many other things, besides fossile fuels?
BP is trying hard to become big in renewables. E.g.:
https://news.sky.com/story/bp-blows-away-bid-rivals-with-big...
https://www.reuters.com/business/sustainable-business/bp-gam...
https://www.bp.com/en/global/corporate/news-and-insights/pre...
I suppose they'll put some of this windfall into grabbing an even bigger market share in renewables.
Regardless of what the perceived Zeitgeist might be, oil is still king and will remain for many years to come; it has incredible momentum and has been defining the world's economics for almost 200 years now, look at any chart with global GPD to oil consumption.
The gas BP sucked out of the ground and sold for $2.50 (and made $14bn in profit in 2019 on) they could sell for most of 2022 between $6 and $9.
To not make an increase in profits, the reduction in fossil fuel usage (compared to the prior year) would have to be on the >90% order of magnitude.
> All while we are trying to get away from fossil fuels. At least superficially there is a mismatch here, between the profits and some perceived Zeitgeist.
Not necessarily.
You might be right, but as someone said: the best and most profitable to their makers buggies were probably built in the first few years before cars took over road transport.
We won't know which of these it was until after the fact.
> Does BP do many other things, besides fossil fuels?
They probably do many other things, such as any large enterprise. The real question is: where do most of their profits come from, and would they be able to pivot away to another major profit center? History tells us that most other companies in this situation don't have other major profit centers nor are they able to create new ones. There are exceptions, of course, that's why we call them exceptions :-)
It annoys me that these companies aren't subject to a windfall tax. These profits are driven by the Russian embargos following the invasion of Ukraine
The most annoying thing is that when the price slumps again these companies will be back cap in hand for money to decommission their oil rigs
> these companies aren't subject to a windfall tax
Last year, the government introduced a windfall tax - called the Energy Profits Levy - on the "extraordinary" profits being made at energy companies.
The rate was originally set at 25%, but has now been increased to 35%
It's a little more complicated than that. First, Oil & Gas in the UK pay 40% corporation tax to start with (30% corp, 10% supplementary), and the levy is on top of that, meaning they're paying 75%. However, there's an "investment allowance" that means most Oil & Gas companies in the UK can shuffle things around to not pay anything, and they're only paying these rates on UK profits which are only a tiny share of their profits.
>Oil and gas firms also pay 30% corporation tax on their profits as well as a supplementary 10% rate. Along with the new windfall tax, that takes their total tax rate to 75%.
So that's a huge win for the Exchequer...
On UK profits only:
> BP said its UK business, which accounts for less than 10% of its global profits, will pay $2.2bn in tax for 2022, including $700m due to the Energy Profits Levy.
As commentators point out, they've been very busy shifting money to reduce their tax bill. Also, 30 + 10 + 25 != 75, so I don't know why the BBC keep repeating this number.