Oil and gas titan Shell plc has announced a dip in its annual profits for 2023, attributing the decline to fluctuations in energy prices throughout the year. The company reported profits of $28.2 billion in 2023, a notable decrease from the record-breaking $39.9 billion it achieved in 2022 (marking its highest earnings in its 115-year history).
The surge in oil and gas prices following Russia’s invasion of Ukraine in 2022 had propelled energy firms, including Shell, to record profits. However, the aftermath saw a gradual easing of household bills from their peak but remained notably high.
The price volatility in energy markets saw Brent crude oil soaring to nearly $128 a barrel post-invasion before gradually receding to around $80. At the same time, gas prices also experienced spikes but eventually moderated from their peaks.
In response to the extraordinary profits earned by energy companies, the UK government implemented a windfall tax known as the Energy Profits Levy on firms’ UK operations to subsidize gas and electricity bills. Shell plc confirmed paying £178 million in windfall tax for 2022 and £240 million under the Energy Profits Levy for 2023, contributing a total of £1.1 billion in overall tax for the year.
Despite the profit downturn, Shell plc remained committed to shareholder returns, disbursing $23 billion to its shareholders in 2023 and announcing a 4% increase in dividends and a $3.5 billion share buyback program over the next three months.
The company attributed the profit decline to lower oil and gas prices, reduced trading volumes, and lower refining margins. However, it noted an uptick in liquefied natural gas (LNG) trading, driven by increased demand in Europe following supply disruptions from Russia.
Shell’s quarterly performance in the final three months of 2023 surpassed analysts’ expectations, posting profits of $7.3 billion. Analysts caution that oil and gas prices will likely remain unpredictable in 2024 due to ongoing geopolitical tensions, particularly in the Middle East.
While Shell plc emphasizes its commitment to simplifying its operations and reducing emissions, critics accuse the company of prioritizing shareholder payouts over investments in clean energy. Nonetheless, Shell’s CEO, Wael Sawan, reiterated the company’s focus on delivering value with fewer emissions in the coming year.
