Chancellor eyes energy windfall tax despite trade body warnings

Oliver Dean | 17th March 2026 | Comment

BP could be one of two major oil companies to be hit with a windfall tax (Photo by Ian Waldie/Getty Images)

As war continues and oil prices climb, Rachel Reeves has refused to rule out a windfall tax on oil and gas firms.

Shell and BP are set to pocket a combined £5 billion in extra profit this year as conflict in the Gulf sends oil prices surging. However, keen to scrape the bottom of the oil barrel for a quick cash grab, Chancellor Rachel Reeves has signalled that a windfall tax could be brought in to ease Briton’s energy bills.

Goldman Sachs analysts project Shell’s net income will rise by $3.7bn to $26.7bn, while BP’s is expected to grow by $2.8bn to $12.9bn, as Brent crude tops $106 a barrel, which is in itself up from $65 before the conflict began. European gas prices have surged in parallel, climbing from €30 to €45 per megawatt-hour.

The gains stem not from Gulf output but from the two companies’ globally diversified portfolios, where higher oil prices are more than offsetting losses closer to the conflict. Henry Tarr, co-head of energy and environment research at Berenberg, said both companies would “benefit mainly from higher oil prices across the rest of the portfolio, along with higher refining margins for their downstream operations as prices for products like diesel have also moved higher.”

BP holds direct regional exposure, while Shell’s main vulnerability runs through its Pearl gas-to-liquids plant in Qatar and its Qatari LNG operations. But the global spread of both businesses means the net effect is firmly positive.

The political pressure in the UK, however, is now moving …

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