ALEX BRUMMER: Green test for global trade

Prepare for the explosion of political anger. As the elderly and underprivileged shiver in their homes this winter and the UK economy spirals further and further into the doldrums of the global energy price spiral, big oil has never had it better.

The granddaddy of them all, ExxonMobil, has started the reporting season with a profit of $55.7bn (£45.3bn).

And while the last quarter of the year was weaker than markets expected due to a dip in crude oil prices, critics will never be pleased.

The transfer of wealth from ordinary consumers to the fossil fuel giants and Middle Eastern potentates, among others, does no good to capitalism and the market system.

In the UK, Shell is expected to announce around £30bn in profits today. Jeremy Hunt has already taken steps to collect some of that income by raising the windfall tax for North Sea oil producers from 25 percent to 35 percent, bringing the top tax rate to 75 percent.

The North Sea represents only a fraction of the oil companies’ revenues.

They have the wealth, resources and proven assets to drill elsewhere in Africa and the Middle East, where production costs are lower.

So there must be a concern that any windfall taxes will only push back investment in the North Sea and make the UK more dependent on overseas gas and oil while paving the way for a greener future.

North Sea oil player Harbor Energy has already curbed new investment plans.

Yes, part of the big oil profits will be funneled back to taxpayers. Shell estimates windfall tax payments at £1.6bn, but this will be trivial compared to billions of pounds in payouts to shareholders.

Some of this will flow back into citizens’ pockets through pension funds, but that’s a hard thing for big oil to make.

What everyone would like to see is that big oil plays a big role in climate change.

UK-based BP, led by Bernard Looney, has redesigned the company to be greener and has already pledged to invest £18bn in helping to eliminate carbon by 2030. If that happens, it would be great.

And if pension funds don’t invest in new nuclear energy because they think it’s too risky, why not big oil?

There is a greater risk to the greening of Britain and Europe currently pillaging the sector.

President Joe Biden’s embrace of climate change in the Inflation Reduction Act threatens to disrupt the drive for a carbon-free future.

There is a potential $369 billion in green subsidies and incentives to be had if the technologies used are built in the US. Households can claim up to $8,000 for insulation.

There is a risk that the major oil companies’ drive to become carbon neutral will shift the focus to North America. The EU and Britain (to a lesser extent) weep viciously, claiming that subsidies for homegrown equipment on this scale are protectionist.

In response, the EU is planning to lift ‘state aid’ rules for green subsidies, fearing the impact on European-based businesses and investments.

This is how trade wars start.

Lynch overhang

Poppy Gustafsson has done her best to create space between herself and former employee and major shareholder Mike Lynch at cybersecurity pioneer Darktrace.

The Cambridge-based company’s connection to Lynch, with an 11.2 percent stake (owned by his wife) and its chief financial officer Sushovan Hussain, would always remain a problem.

Lynch has been battling fraud allegations in the US over the sale of Autonomy to Hewlett Packard for nearly a decade, and Hussain has been convicted in the US.

New York-based Quintessential Capital, which has taken a short position in Darktrace, has released a disturbing document calling into question the company’s financial statements.

The short-seller makes a series of allegations about how revenue is supported by an alleged network of fictitious companies. Darktrace dismisses the allegations, but the stock price is crushed.

The Lynch cloud refuses to lift off.

Paper tiger

While in charge of Tesco, Dave Lewis began divesting redundant assets, including coffee shop chain Harris + Hoole and family food chain Giraffe.

With Tesco back at the top of the supermarket chain, Lewis’ successor Ken Murphy has bought Paperchase, the designer-led stationery and greeting card chain, out of administration.

Tesco joins Mike Ashley’s Frasers and Simon Wolfson’s Next as retail buyer of last resort.