MAGGIE PAGANO: Fossil fuels are here to stay until cleaner technologies are developed

When BP makes stunning profits – as the oil and gas giant has done between April and June this year – investors are rewarded with juicy dividends. That’s only fair, and the basis of a publicly listed company which is owned by its shareholders.

But when BP dives into the red – as it did a few years ago in the middle of the Covid pandemic when demand slumped – investors saw their payments slashed by half. That’s only fair too, they shared in the risk.

Yet chief executive Bernard Looney did not go begging to the Government for a bail-out, as so many other corporations did.

Instead, he embarked on a self-help drive, cutting costs, paying down debt, investing more in renewables and generally got the house in order.

It’s partly why the company has managed to do so well, triggering a rare 4 per cent lift in the share price. Which is why the outcry over BP’s sparkling profits of £6.9billion is so childish, if not disingenuous.

BP’s profits have soared because over the last year the price of oil has risen by 40 per cent while natural gas has rocketed by 100 per cent. 

It is worth reminding those in Westminster, and green campaigners who are criticising BP’s ‘eye-watering profits’ and it’s outrageous ‘unfettered profiteering’, that BP is a price-taker, and not a price-giver.

The oil and gas giant – along with other energy giants such as Shell and Centrica –have benefited from the disruptions in the energy market caused first by renewed demand in the post-lockdown period and then the disastrous impact of Russia’s invasion of Ukraine.

Yet the nature of their volatile markets means that these companies will always swing from extreme loss to profit, and no doubt back to losses again.

Indeed, the oil price is highly sensitive to even the smallest changes in demand, and is already falling fast as oil-producing countries, Opec members, attempt to bring more of the black stuff out of the ground. 

It’s also worth recalling that only a few years ago BP and Shell were the pariahs, shunned by the banks, the insurers and asset managers as dirty fossil fuel dinosaurs, which forced them to sell many of their finest oil and gas fields in the drive to go green.

Today they are the saviours, pumping out oil and gas as fast as they can to make up for Russia choking gas supplies to Europe in retaliation for penal sanctions.

Of course, the optics are not great with household energy bills rocketing towards £3,600 a year, or more.

It’s time the politicians squared up with their citizens – that we are caught in a dichotomy of complex choices.

There are enough fossil fuels to keep us going for centuries to come, which are cheap and efficient. But the pressures of net zero targets mean that governments have opted for energy sources which are expensive and not so efficient.

There are no easy fixes, only tough choices, such as cutting green levies on fuel and electricity until this crisis is over.

Or even more unpalatable ones. As Russ Mould of broker AJ Bell says, leaders could go on bended knees to Caracas, Tehran and Moscow and plead for the oil taps to be turned on in return for ending sanctions. That’s not going to happen anytime soon. 

Buying shares in BP and Shell is a better bet. Whether we like it or not, hydrocarbons are here to stay until cleaner and cheaper technologies are developed.

Higher rates are working

Early days, but house prices in July rose just 0.1 per cent, according to Nationwide. Over the last year, the rise was 11 per cent. So July’s figure suggests the market is cooling down and is likely to continue if the Bank of England goes ahead with its 0.5 percentage-point rise tomorrow.

Yet house prices – the average is now £271,000 – remain remarkably resilient because of the continuing shift to work from home, the tight employment market and a shortage of properties.

More than ever we need the next PM to establish a joined up housing policy. He or she should follow Churchill’s order to his housing minister Harold MacMillan after the former narrowly won the 1951 election: ‘Build the houses for the people’.

Crisis? What crisis?

Ferrari is selling more of its flashy cars than ever in its history, with 3,445 of them shipped around the world in the last quarter. Sales more than doubled to China, Taiwan, Hong Kong and rose by 60 per cent in the US.

The rich are different from you and me.