BP reports profits of ?7bn as oil prices surge because of Ukraine war

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BP made profits of nearly ?7bn in the second quarter of the year as it became the latest in a procession of energy companies to enjoy huge financial benefits from surging oil prices during Russia’s invasion of Ukraine, even as families struggle in a cost of living crisis.

The FTSE 100 oil company on Tuesday said its preferred measure of profit, which it describes as its underlying replacement cost profit, rose to $8.5bn (?6.9bn) between April and June, up from $6.2bn in the first three months of the year, and $2.8bn in the second quarter of 2021.

BP had previously reported its highest quarterly profit for more than a decade in the first quarter.

Oil companies in the UK and beyond have enjoyed booming earnings in recent months as energy prices have risen, even as households around the world have struggled with soaring bills. As Russia’s invasion grinds on, some analysts have predicted the UK annual energy bills could jump to ?3,850 in the winter, three times what they were paying at the start of 2022.

Shell last week reported record quarterly profits of nearly ?10bn between April and June, while the British Gas owner, Centrica, made operating profits of ?1.3bn, most of which came from its oil and gas drilling division. Shell and France’s Total last week said they would give shareholders billions of dollars in share buybacks and dividends.

Energy bills have been an inportant contributor to inflation, which has jumped to a 40-year high of 9.4% in the UK. Several forecasters believe inflation will move above 10% in the coming months.

The UK government belatedly responded to political pressure amid soaring energy prices with a windfall tax on oil companies’ “extraordinary profits”. However, the 25% tax, known as the energy profits levy, did not come into force until 14 July, meaning that it does not apply to profits made by BP or other oil companies during the second quarter.

BP reports its own replacement cost profit measure to indicate its profitability before taking into account swings in the value of the oil it has in storage.