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Shell earnings fall as energy prices fall


Shell, a major oil and gas industry player, has announced a decline in its yearly earnings due to the decrease in energy prices over the previous year.

The business's profits in 2023 amounted to $28.2 billion (£22.3 billion), a decrease from the previous year's earnings of $39.9 billion. However, the latter figure was the most significant earnings the company has achieved in its 115-year existence.

Energy companies achieved unprecedented profits as oil and gas prices surged after Russia's incursion into Ukraine, which raised concerns about potential supply disruptions.

Household expenses have decreased since 2022 but continue to be significant.

The cost of fuel and electricity, together with petrol and diesel, first started to rise with the conclusion of COVID lockdowns but saw a significant increase in March 2022 following the eruption of conflict in Ukraine due to apprehensions about the availability of resources.

The price of Brent crude oil surged to over $128 per barrel in the aftermath of the invasion but subsequently declined and is now hovering around $80. Petrol prices suddenly increased but have since decreased from their peak levels.

The price spike in 2022 resulted in significant gains for all energy corporations, including major players such as Shell and BP. As a reaction, the government implemented a windfall tax, known as the Energy Profits Levy, on the exceptional profits made by companies from their activities in the UK. This tax aims to finance a program that provides subsidies for gas and electricity bills.

Shell has verified that it disbursed a total of £178 million in windfall tax in the United Kingdom for 2022. The company's spokesperson said that the company's total tax payment in the UK for 2023 amounted to £1.1 billion, with £240 million being subject to taxation under the Energy Profits Levy.

Shell said that it distributed $23 billion to its shareholders in 2023. Additionally, the company is raising its dividend by 4% and initiating a $3.5 billion share repurchase plan that will span the next three months.

Shell attributed the decline in profit in the previous year to reduced oil and petrol prices, decreased trading volumes, and diminished refining margins. Refining refers to converting crude oil, the extracted raw material, into various products like diesel.

In 2023, there was an increase in the trade of liquefied natural gas (LNG). Several European nations adopted liquefied natural gas (LNG) as a substitute energy source after Russia reduced natural gas exports to the continent.

Consequently, the British corporation recorded earnings of $7.3 billion in the last quarter of 2023, surpassing experts' predictions but declining from the previous year's record of $9.8 billion in the same timeframe.

According to Jamie Maddock, an energy analyst at Quilter Cheviot, Shell's impressive performance might be attributed to its gas sector.

In 2024, he cautioned that oil and petrol prices would probably continue to be "unpredictable" because of the on-going high geopolitical tensions in the Middle East.

"These types of environments are conducive to the success of energy giants, as evidenced in 2022. Therefore, it would not be surprising to witness Shell's continued performance throughout the year," he said.

Despite its robust profitability, Jonathan Noronha-Gant, a senior campaigner at Global Witness, criticized Shell for prioritizing shareholder pay-outs and making climate-damaging decisions instead of investing in renewable energy.

Wael Sawan, Shell's CEO, said that in 2024, the business would persist in streamlining its organizational structure, emphasizing generating more value while reducing emissions.

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