Oil profits, over-high petrol prices and fuel poverty
Shell’s record quarterly profits announced yesterday of £6.7bn (over £20bn a year), following on BP’s record quarterly profits announced the day before of £6.4bn (also over £20bn a year), demands a response from the Government on three specific grounds.
First, it is unfair to the poor. Fuel poverty (expenditure of more than 10% of household income on fuel) now stands at between 4-5 million. Second, it is unfair to the motorist. The price of oil has fallen 56% since its peak in July, yet the price at the pumps has fallen by only 18% over the same period. Third, it is unfair to the taxpayer. When both business and households are now under severe pressure in the downturn, it is unacceptable that one group can make huge unmerited profits out of a global oil shortage and yet escape passing on a fair share in an economic crisis to the wider community. There are also precedents: Labour’s £4.5bn windfall tax on the private utilities in 1997 as well as the Tories’ windfall tax on the banks previously because of unearned profits from rocketing interest rates.
The oil companies must not be allowed to hold the country to ransom. A Robin Hood tax could take different forms. Gordon Brown has opposed a windfall tax on the grounds that he announced several years ago that he would not raise Petroleum Revenue Tax further, but that was in ‘normal’ times before the highly abnormal ones of this recession. Exceptional times deserve exceptional policies, as he himself rightly said.
Or, whilst avoiding taxing when energy prices are high, the Government could claw back some of the gains, estimated at £9bn, which will accrue to the energy companies through being given 100 million free permits to trade greenhouse gas emissions under the second phase of the EU Emissions Trading Scheme 2008-12. Ofgem has supported this, and Spain is already doing this.
It would offer a double whammy: help Britain’s climate change targets and fund lower social energy tariffs for low-income households as well as much more extensive energy efficiency measures. It is justified when windfall profits will be highest in countries with liberalised energy
markets where costs can be easily passed on to customers, where coal dominates, and where there are high levels of free allowances. All three conditions apply to Britain.
I shall raise this demand in an EDM on Monday, in a letter to Alistair Darling in preparation for this Pre-Budget Report next month, and at PMQs.

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