Johnson Rules Out U.K. Windfall Tax After BP Posts Mega-Profits

(Bloomberg) --

Prime Minister Boris Johnson appeared to rule out a windfall tax on energy companies after BP Plc promised to channel billions of pounds of its profits into U.K. investments.

If the country was to levy such a tax on energy firms' earnings, which are surging due to high oil and gas prices, that would “discourage them from making investments we want to see, that in the end will keep prices lower for everybody,” Johnson said in an interview with ITV on Tuesday.

His comments came just hours after BP said its first-quarter net income, excluding accounting charges related to its exit from Russia, more than doubled to $6.25 billion. The company's huge profit -- the highest in a more than a decade -- prompted calls from opposition politicians and activists for the government to take some of that money and use it to help consumers.

Europe's largest energy companies have targets on their backs as the vast financial gains from high oil, gas and electricity prices coincide with a cost-of-living crisis for millions of people. On Monday, Italy raised its windfall tax on profits in the energy industry to 25% from 10% while approving a 14 billion-euro ($15 billion) aid package to shore up companies and consumers hit by surging costs.

Last week, U.K. Chancellor of the Exchequer Rishi Sunak said he could consider a windfall tax if energy companies don't do enough to invest in developing domestic supplies. As BP reported its first-quarter results on Tuesday, it seemed to respond to this challenge with a promise to increase the proportion of its spending in the U.K. and be a company that is “backing Britain.”

Chief Executive Officer Bernard Looney pledged £18 billion ($23 billion) of spending by 2030 on North Sea oil and gas as well as low-carbon energy sources. U.K. Business Secretary Kwasi Kwarteng welcomed the move.

Looney also argued that the additional returns for investors announced by his company would benefit the whole country. “If you're paying into a pension in the U.K., you're going to be impacted by that $2.5 billion buyback that we announced,” he said in an interview with Bloomberg TV. “These are not faceless institutions, these are everyday people in Britain.

Shell Plc, Europe's largest energy company that is also based in London, will publish its results on Thursday. French oil and gas giant TotalEnergies SE promised to boost investments in the North Sea when it reported a big increase in profit last week.