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City comment: BP boss Bernard Looney is doing himself no favours on windfall tax

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Bernard Looney at Downing Street (PA Archive)
Bernard Looney at Downing Street (PA Archive)

Bernard Looney is not doing himself any favours.

The BP boss must have winced when the accounts department confirmed blockbuster quarterly profits of $6.2 billion this week. Hardly a good look when energy bills are soaring.

What did Looney do? Shovel cash in the direction of investors. BP has promised to spend an extra $2.5 billion buying back its own shares over the next few months, far more than the City was expecting.

The argument that buybacks boost our pensions looks increasingly abstract when we’re confronted with the tale of a cold pensioner riding the bus because she can’t afford to heat her home.

Bumper payouts make it harder to fend off calls for a windfall tax. The government did its best, saying a one-off tax would deter investment. But Looney is taking them for fools: while the share buyback was increased this week, BP’s investment plans for the year were not.

BP did trumpet an investment of £18 billion in Britain by 2030. It sounds like a big number but that works out at £2.25 billion a year — basically what investors will get in the next few months — and Looney has admitted that a windfall tax would not change BP’s investment plans.

Shell today announced profits even higher than BP’s — but CEO Ben van Beurden has the good grace to put off higher payouts until the heat has died down.

The one fig leaf energy firms had was arguing that a windfall tax would make it politically risky for investors to buy their shares. That would make raising cash more expensive and limit the amount they could invest.

The soaring payout has nixed that argument. Bank of America said this week that BP’s “buyback booster dwarfs windfall tax risks.” Essentially, the payouts are so good that the risk is worth it.

Looney surely doesn’t want a windfall tax. He may be accidentally walking himself into one.

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