BP announces £11.8 bn of shareholder payouts, over 14 times as much as the energy giant invested in "low carbon" activities.

The energy giant reported record underlying profits of $28 bn (£22.4 bn) in its full-year results, more than double the $12.8 bn profit the company made in 2021. New analysis from the think tank Common Wealth finds that the company distributed £11.8 bn to shareholders. This windfall represents a direct transfer of income from ordinary bill payers to the company’s shareholders.

Today’s figures show BP’s low-carbon investment is far below the figure for the company’s investment in fossil fuels and the sums distributed to shareholders.

Analysis by Common Wealth Senior Analyst Chris Hayes found that in 2022 BP spent over 14 times as much on shareholder payouts (dividends and share buybacks combined) as their capital expenditure on their "low carbon" segment. In Q4, BP spent around 8 times as much on payouts to shareholders as their capital expenditure on this "low carbon" segment.

The results follow on from last week’s announcement by Shell, where the company recorded profits of over £32 billion for 2022. Over the full course of 2022, Shell’s distribution to shareholders (combined share buybacks and dividends) totalled £20 billion — roughly 7.5 times their cumulative investment in Renewable and Energy Solutions (£2.8 bn).

Previous research from Common Wealth found that together BP and Shell had distributed £147 bn to shareholders between 2010 and 2020.

While defenders of the scale of shareholder payouts have claimed ordinary British pensioners are some of the main beneficiaries, analysis conducted by Common Wealth in 2022 found the UK’s major pension funds own only 0.2% of BP and Shell, underlining the minimal impact a more ambitious windfall tax would have on pensions. By another measure, Common Wealth estimate that Shell and BP equities together comprise 0.25% of UK defined benefit pension fund portfolios. [1]

Further investment in fossil fuels goes against the recommendations of global organisations like the International Energy Agency, who argue that any new oil and gas development is incompatible with climate goals.

The surge in the profits of the energy giants — and their failure to use this windfall to invest in a transformative surge in renewable energy — raises questions about whether the for-profit corporation is the adequate vehicle to effectively deliver a clean energy transition.

[.img-caption][.img-caption-header]Figure 1[.img-caption-header][.img-caption-text]Source: Common Wealth analysis[.img-caption-text][.img-caption]

[.img-caption][.img-caption-header]Figure 2[.img-caption-header][.img-caption-text]Source: Common Wealth analysis[.img-caption-text][.img-caption]

[.quote][.quote-text]The pivot back toward oil and gas — and the prioritisation of shareholders over renewable investment — confirms a critical lesson: the for-profit corporation is poorly equipped to deliver the energy transition at the required speed. Its incentives and purpose dangerously misalign with the needs of people and planet. A successful transition will require reckoning with that fact and acting to reorganise our energy system.[.quote-text][.quotee]Mathew Lawrence, Director at Common Wealth[.quotee][.quote]

[.quote][.quote-text]What’s critical about these results is not just the extraordinary scale of profits, but how BP is using them. With £11 billion of share buybacks and dividends in 2022 and over 14 times as much spent on payouts to shareholders as low carbon investment, the picture is clear. Rather than pivoting toward a clean energy future, these results once again show BP doubling down on fossil fuel investment for the long term. With each set of results we amass more evidence that the market won’t deliver a sustainable future.[.quote-text][.quotee]Adrienne Buller, Director of Research at Common Wealth[.quotee][.quote]