Shell earned particularly well from the sale of natural gas and the liquid LNG variant. The division’s second-quarter profit rose by a staggering 163 percent to $8.1 billion. The multinational announced this on Thursday morning. The chemical branch, which includes refining, saw revenues almost double to 2.1 billion thanks to higher margins. Shell now earns $28 on every barrel of oil its refineries process. In the first three months that was 10 dollars a barrel.
Shareholders are fat buyers: Shell is buying back $6 billion worth of its own shares after previous major buyback programs. This supports the share price. In the meantime, consumers are paying the bill.
Everywhere? Not that. In France, the price for a liter of petrol will go to 1.45 euros from September, based on today’s prices. The fact that fuel in France will soon be sold for a friendly price is due to a tax reduction of 30 cents. In addition, the French energy group TotalEnergies is deducting another 20 cents from the price, until November. After that, customers will receive a 10 cent discount per liter until the end of the year.
TotalEnergies, which also announced a record quarterly profit on Thursday, is not cutting prices out of kindness. The gesture came under threat of a possible additional state tax. Plans for this were narrowly rejected by the French House of Commons after TotalEnergies announced the discount. A hefty reduction was necessary for Paris, because the Elysée fears that citizens will take their yellow vests out of the closet again. Paris previously limited the increase in the electricity price.
High profits due to increased prices
The call for such a ‘windfall tax’ (in English windfall tax) sounded in several European countries in recent months after energy companies reported exceptionally high profits. Energy companies just get their profits thrown into the lap and should therefore give back a part to society, is the criticism of various politicians, also in the Netherlands.
A number of countries have therefore already introduced a ‘lucky tax’ or ‘mumps tax’: a temporary or one-off additional levy to skim off excess profits. The United Kingdom (Shell falls under the windfall regime there), Romania, Slovakia, Bulgaria and Hungary, among others, introduced one. Spain introduced a ‘regulatory measure’ with a similar effect. It should generate 7 billion euros in two years.
Cabinet does not want a lucky tax
In the Netherlands, the government does not want to introduce such a levy for the time being, despite requests from the opposition. Although other countries quickly introduced an extra tax, State Secretary Marnix van Rij (Finance) states in a recent letter to parliament that it will take at least two years before the tax rules are adjusted.
Moreover, the government finds it undesirable to interfere in the expenditure of company profits. ‘Companies are free to use their profits in a way that they see fit’, the State Secretary replies to parliamentary questions. Moreover, it often concerns internationally operating concerns, of which it is unclear exactly where the profits ‘precipitate’.
An increase in the mining levy is an alternative, but the government fears that such a levy will make drilling new gas fields in the North Sea less profitable. And it is precisely with this that the government wants to speed up, now that the Netherlands wants to get rid of Russian gas.
Business climate
Another possibility, a temporary increase in corporate tax, would also affect sectors that are not making mega profits and would worsen the business climate. According to the cabinet, taxes in the Netherlands are already so high that the Dutch tax authorities even after the introduction of the British tax system windfall tax still collects more money in percentage than its British counterpart.
The government therefore does not seem to intend to skim off the profits of energy companies. The situation may change in the coming months, especially now that the already extremely high gas price shot up again this week after Russia further turned off the gas tap to Germany. Shell says it understands the concerns, but states that huge investments are needed to be able to extract enough oil and gas in the coming years. The company also says it is investing billions in sustainable energy.