From Morningstar: 2024-09-03 06:01:00

The Labour government plans to raise the Energy Profits Levy for oil and gas companies, amid a 9% energy bill increase and North Sea oil production decline. The EU also has a windfall regime taxing companies like Shell and BP. Offshore Energies UK predicts the levy hike will slash investments and jobs in UK projects.

Shell and BP have already paid significant amounts under the Energy Profits Levy. Shell paid $802 million in 2023, part of a $13 billion global tax bill. BP paid $626 million. Oil companies also pay a 30% “ring fence” tax in the UK, making the effective tax rate 78%.

Offshore Energy UK warns that the Energy Profits Levy increase could lead to a massive drop in UK oil and gas investments, jobs, and tax revenue. Shell’s stock price has jumped despite the tax hikes, but pressure from investors to divest from oil and gas stocks remains.

Shell is transitioning away from its legacy hydrocarbon business towards low-carbon solutions. Morningstar analysts believe Shell’s strategy should help reduce its carbon intensity by 15%-20% by 2030. However, the impact of potential carbon taxes on oil demand may still be a decade away.

A potential carbon tax on global oil producers could impact Shell by raising end product prices and reducing demand. Morningstar analysts expect carbon taxes to become more widespread over time but believe Shell’s gradual transition away from hydrocarbons will help mitigate these risks.



Read more at Morningstar: Oil Stocks Are Staring Down The Barrel – of More Taxes