Fuel Prices and BP Profits

[Nick]

OK, so the wholesale price of oil goes up and the energy companies like BP pass that on. I get that.

But if they are just covering their additional costs why do their profits go through the stratosphere?

[Steve]

OK, so the wholesale price of oil goes up and the energy companies like BP pass that on. I get that.

But if they are just covering their additional costs why do their profits go through the stratosphere?

Because we live in a market (with safeguards) economy - the alternative is worse - and the market will bear those prices. 
 
I see Labour are hypocritically rattling on about hitting BP etc with a windfall tax.  They had their gobs firmly shut in 2020 when BP etc suffered massive losses when the oil price fell. 
 
As a nation we need to keep a level of strategic reserves of oil and gas yet we place the full burden of that on the private companies.  To subject them to a heads we win, tails you lose system will neither be moral nor strategically sensible.

[Barman]

^^^ Wot Steve said ^^^

Plus the government is already trousering a bonus from the VAT on higher prices... 

[Nick]

SO the margin between what BP are spending to buy oil and what they are charging for refined petrol has grown. Yes?

[Steve]

SO the margin between what BP are spending to buy oil and what they are charging for refined petrol has grown. Yes?

Dunno but it seems unlikely
 
This profit resulted from what they were paying for oil and what they later sold it for.  What they're paying for oil now is much higher
 
You can see here how they would have made an inverse windfall loss on those stocks in 2020 and yes made a windfall gain this year
 

[Nick]

SO some of this is rear view mirror stuff, rather like the surge in property prices 

[Steve]

Interestingly BP actually made a massive $20B loss in that 1st quarter of this year
 
https://www.bp.com/en/global/corporate/investors/results-and-presentations/quarterly-results-and-webcast.html

I wonder if Labour will rush to compensate them for the windfall loss they've had to take writing off that Russian deal.

[Grumpmeister]

Aren't we supposed to have significant strategic oil and gas stockpiles for when emergencies like this happen or did some government idiot decide to sell them off in favour of 'green' alternatives?

[Steve]

Aren't we supposed to have significant strategic oil and gas stockpiles for when emergencies like this happen or did some government idiot decide to sell them off in favour of 'green' alternatives?

IIRC it's only for 60 days worth and we place the burden of that on the energy companies so the government doesn't put a red cent into buying the reserves.