Shell accused of ‘profiteering bonanza’ after record first-quarter profits of $9.6bn

Shell accused of ‘profiteering bonanza’ after record first-quarter profits of $9.6bn

Oil and gas giant Shell is facing accusations of “profiteering” following its announcement of record first-quarter profits of over $9.6 billion. Despite a decline in oil and gas prices, the company exceeded expectations and surpassed its previous first-quarter record. Shell distributed more than $6 billion to shareholders through dividend payments and share buybacks.

Record-breaking profits

Shell’s profits in the first three months of this year far exceeded industry analysts’ predictions of $7.96 billion. The company’s first-quarter record was set at $9.1 billion last year for the same period. The better-than-expected performance can be attributed to the efforts of Shell’s energy trading teams, who successfully mitigated the impact of falling prices in the oil and gas market.

Shareholder rewards

Despite the challenging market conditions, Shell rewarded its shareholders generously. The company paid out $2 billion in dividend payments during the last quarter and bought back shares worth $4.3 billion. Shell plans to offer an additional $4 billion in share buybacks over the next three months, demonstrating its commitment to rewarding its investors.

Factors influencing profits

Shell managed to increase its profits despite facing higher taxes and lower market prices for the oil and gas it produces. In the first quarter of this year, global oil prices averaged $81.7 per barrel, compared to $102.2 per barrel during the same period last year. Shell’s energy trading teams played a crucial role in mitigating the impact of falling prices and generating higher profits.

Tax implications

Higher taxes have been a significant factor for Shell, with the company paying over $3 billion globally in the last quarter alone. In the UK, Shell’s tax bill reached $134 million in 2021 following the implementation of the government’s windfall energy profits levy. This year, Shell expects to pay over $500 million to the Treasury after the levy was increased in January, adding further financial pressure.

Comparison to BP

Shell’s impressive profits emerged just days after its rival BP reported a profit of $4.96 billion for the first quarter. Although BP’s profits were lower than the previous year, they exceeded analysts’ expectations of $4.3 billion. The profits of both companies have sparked criticism, with accusations of “profiteering” and calls for action to address their impact on the climate crisis.

Critics’ responses

Sharon Graham, the general secretary of the Unite union, criticized both Shell and BP for their “profiteering bonanza.” She described their scale of profiteering as a corporate scandal and expressed disappointment with the lack of action taken by the government to address the issue. Environmental organization Greenpeace UK’s Charlie Kronick also voiced concerns, highlighting the impact of Shell’s fossil fuel extraction on the climate crisis and calling for the company to use its profits to compensate affected communities.

CEO’s perspective

Shell’s new CEO, Wael Sawan, acknowledged the company’s strong results and robust operational performance despite ongoing market volatility. Sawan took over from previous CEO Ben van Beurden in January and is preparing to lead a capital markets day next month. During this event, he is expected to outline an updated strategy for the company, including a potential exit from the UK’s home energy supply market.

Public opinion and calls for action

A survey commissioned by international development charity Christian Aid revealed that nearly four in five UK adults believe it is wrong for oil and gas companies to make record profits without taking responsibility for their role in causing the climate crisis. Over 60% of respondents think the government should tax fossil fuel profits to provide compensation to communities affected by the climate crisis.

Looking ahead

Shell’s record-breaking profits in the first quarter of this year come after the company reported an annual profit of $40 billion for 2022. The significant increase in profits is attributed to soaring oil and gas market prices last year. This has led to calls for a windfall tax on earnings. As Shell’s CEO Wael Sawan prepares to present an updated strategy, including a potential exit from the home energy supply market, the company faces increasing scrutiny regarding its environmental impact and responsibility.

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  • Shell logo

Image Source:

  • Oil and gas rig