We’re currently facing the worst cost of living crisis in living memory, with soaring inflation compounded by decades of stagnant wages, National Insurance hikes, and a record increase in household energy bills. The energy regulator Ofgem has increased the cap on gas prices to £1,971, which after two years of unprecedented sacrifice during Covid means a hike of over £700 per year per household, leaving millions of families to make the choice between warmth and food.
Not everyone is in crisis mode, however. In early February, BP announced profits of close to £10 billion for 2021, an eight-year record high that justified its chief executive Bernard Looney’s dubbing the company a ‘cash machine’. Five days before, Shell had announced annual earnings of £14 billion. Forecasting the companies’ quarterly results for the final months of 2021, analysts said big oil and gas companies were making something like £900 a second.
Instead of reinvesting those profits to deliver lower costs for consumers or a transition to renewables, Shell and BP have paid out close to £150 billion in dividends to their shareholders in the last decade. This is piracy on an industrial scale, and it is normal people on the receiving end. A tight-knit clique of fossil fuel executives, politicians, and middlemen are picking our pockets and passing the proceeds onto a select few.
Despite the vocal protestations of some high-profile Tories, it is not a febrile transition to renewables driving up energy costs, but that global demand for gas and oil is soaring as major economies open up after Covid restrictions end. Oil prices have spiked in response to the Russian invasion of Ukraine, too, but these companies’ profits were already soaring at the end of 2021: this was ultimately a more severe version of carbon-intensive business as usual, an energy system engineered pre-Covid at a time of low prices and widespread deregulation.
The cosy relationship between the fossil fuel industry and the Tories, particularly, is a matter of public record. Since 2019, the Tory Party and its MPs have registered over £1.3 million in gifts and donations from climate sceptics and the fossil fuel industry: this is a government for sale, and it can be purchased surprisingly cheaply when one considers the astronomical sums paid out to shareholders by fossil firms each year. Rishi Sunak—already one of the richest MPs in history—knows a cash cow when he sees one, and is fast-tracking as many oil and gas fields as possible, with rumours of six new developments in the North Sea likely to be approved this year.
Meanwhile, Sunak’s disregard for normal people, their wallets, and their planet is clear from the derisory ‘support’ he offered to households when the energy crisis began to bite: a £200 ‘discount’, which is actually a loan to be repaid over five years. In contrast, he has rejected calls for a windfall tax on obscene oil and gas profits, claiming that these firms already pay a higher rate of corporation tax and that any additional taxation would deny the sector of much-needed funding for their transition to renewables.
These positions do not look set to change in the coming Budget, but the claims Sunak is using to justify them are laughable. Big Oil companies like BP are actually an enormous beneficiary of tax rebates, reportedly having paid an effective tax rate of -54 percent in 2019, and -19 percent in 2020, and thereby earning a total of £493 million from the taxpayer since 2016 (a small fraction of the £4 billion paid to oil and gas companies to support extraction overall). As well as immiserating people in Britain, fossil fuel firms are subsidised by UK Export Finance to the tune of billions, allowing them to stoke foreign conflicts and pollute the environment abroad with reckless abandon. And despite government pledges to drop funding for these projects, around 40 new projects are currently under consideration.
A government serious about decarbonisation and keeping costs down for ordinary people would countenance nothing short of an end to fossil fuel subsidies and a wind-down of extraction, with a green job guarantee to ensure a just transition for workers in polluting industries. That means a windfall tax, the proceeds from which should go toward keeping down our energy bills right now. In the long term, we need drastic structural changes to our energy system with public ownership of energy as a central pillar of any new system. Big oil and gas companies have demonstrated time and time again that they refuse to risk losing out on the perpetual money-spinner that is fossil fuels, and anyone who believes they can play a real part in our decarbonisation efforts is either having their wallet inspected or simply a willing stooge for the industry.
After all, big fossil fuel firms knew about the impact of climate change for decades—and instead of taking action to decarbonise, they spent hundreds of millions on disinformation, lobbying, and false advertising. Even when presented with incontrovertible proof that their industry was on course to threaten life on earth as we know it, these fanatics went to extraordinary lengths over the course of decades to cover up the threat of climate change rather than risk their bottom line taking a hit.
Publicly owned renewable energy is the only way to counter their power and ensure that the enormous benefits of a zero-carbon economy are distributed fairly. The Welsh Labour government is already looking into the possibility of setting up such an entity. This system would allow for planning and coordination free from the profit motive, meaning that global fluctuations in prices could be mitigated, keeping costs as close to zero as possible for consumers. Through an enormous centrally-coordinated retrofit campaign, too, we could eliminate fuel poverty entirely, massively reduce aggregate energy demand, and save thousands of lives each year.
We have seen in recent weeks other countries with partial state-ownership of energy force those companies to foot the vast majority of increased costs, such as France, where a gas price rise has been capped at four percent, leaving EDF to foot the rest of the bill, and Portugal, which has ruled out household price hikes entirely. We can and should go further, looking to examples of publicly owned renewables in Uruguay or Cuba’s Tarea Vida, an enormous state-directed mobilisation of the Cuban economy to confront climate change. It is only a matter of political will holding us back.
When fossil fuel companies wield this much financial power, only a mass movement uniting organised labour and climate campaigners with depoliticised people feeling the pinch stands a chance of shifting the agenda away from its present stagnation. We need a windfall tax on big oil and gas profits now. And in the coming years, a socialist Green New Deal for people and planet is the only way to keep the bills down and the lights on.