The head of one of the world’s largest oil companies is urging authorities to take from the rich to help the poor.
As the cost of gas skyrockets in the UK and across Europe, “one way or another, there needs to be government intervention,” Shell CEO Ben van Beurden said at the Energy Intelligence Forum in London today (Oct. 4), quoted by Bloomberg. “A government intervention that somehow results in protecting the poorest, that probably may then mean that governments need to tax people in this room to pay for it.”
Executives from the energy sector’s largest companies, including from oil and gas majors Saudi Aramco, ExxonMobil, and Chevron, among others, are in attendance at the two-day conference, which concludes on Oct. 6. A Shell spokesperson told Reuters van Beurden’s statement on taxation referred to companies, not individuals.
The UN backs windfall taxation
At the UN general assembly last month, UN secretary general António Guterres urged developed countries to tax the windfall profits of oil and gas companies, and use the money to combat loss and damage caused by the climate crisis as well as to assist people struggling with rising food and energy prices.
A similar message was shared by the United Nations Conference on Trade and Development (UNCTAD), which criticized central banks’ rapid increases in interest rates as pushing the global economy to the edge of recession. UNCTAD encouraged policymakers to use other tools to control inflation, such as windfall taxes, price controls, and antitrust measures.
The alternative: capping gas prices
While promoting higher taxes for energy companies, Shell’s outgoing boss explicitly discouraged governments from setting gas price ceilings.
The US and several European nations ruled out a total ban on Russian oil because it would exacerbate gas shortages and push prices up. But capping its price would present a “real implementation challenge,” van Beurden said. There are several loopholes in the plan:
The burden to ensure price caps are not breached will fall on insurance companies but they don’t all side with G7 and coalition countries. In recent months, Russia has been creating its own insurance entities, likely to sidestep the cap
The restrictions could be circumvented if, say, oil shipments are bundled with some symbolic but pricey services, such as customs services, laboratory analysis, or document translation
Russia could quietly manipulate cargo volumes to bring the price per barrel closer to the market price
Vladimir Putin could just withhold exports to countries that enforce the cap
OPEC countries could take Russia’s side to thwart an emerging buyers’ cartel
No one knows if India and China, the biggest new buyers of Russian oil, will join
By the digits
$8.2 million: Van Beurden’s pay package in 2021. As this is his last year at the helm, he’s expected to rake in even more
€140 billion (around $138 billion): Revenue EU is expected to earn from the windfall tax of between 50-90% it agreed to levy on energy companies last week, which it will use to help lower consumer bills and fund the switch to green energy
15: EU nations urging the European Commission to table a price cap, including France, Italy, and Spain
€200 billion ($198 billion): the support package Germany unilaterally announced to combat the cost-of-living crisis, irking much of the 27-nation EU bloc that was hoping to arrive at a unanimous decision on price caps
40% to 9%: EU’s falling dependency on Russian oil between 2021 and now
£1,000 ($1,137): how much an average British household will save yearly thanks to the gas price cap put into action on Oct. 1
25%: a proposed temporary tax on ring fence profits of oil and gas firms operating in the UK, levied in addition to the existing ring fence corporation tax (30%) and supplementary charge (10%), increasing the headline rate of tax from 40% to 65%
£5 billion ($5.7 billion): funds that would’ve been raised by a windfall tax on North Sea oil and gas operators proposed by former UK chancellor Rishi Sunak, which prime minister Liz Truss is vehemently opposed to