BP Profit Tops $8bn as Gulf War Skyrocket Fuel Margins

BP reported underlying replacement cost profit of $8.46 billion for the third quarter, a figure that nearly quadrupled from $2.2 billion in the same period last year. The result marked the highest quarterly profit for the energy company since 2008, when it recorded $8.9 billion. This surge far exceeded the $7.3 billion analysts had projected, driven by a sharp increase in the spread between crude oil costs and the prices of refined fuels like diesel and gasoline.

The profit spike coincided with a period of severe disruption to refineries in the Gulf region and across Russia. These disruptions, linked to the ongoing US-Israeli war on Iran, pushed pump prices for diesel and petrol to all-time highs across the UK, Europe, and the United States. Although global crude oil prices remained below the peaks seen during the 2022 energy crisis, the cost of finished fuels climbed due to supply chain bottlenecks.

Meg O’Neill, BP’s chief executive, described the period as a banner quarter for the refining business. She noted that BP-operated refineries captured strong market opportunities, with the company earning almost $47 for each barrel produced. O’Neill told Bloomberg TV that the industry demonstrated remarkable adaptability, with refineries running close to capacity, shipping taking longer routes, and strategic reserves helping to bridge supply gaps.

UK motorists are currently facing the highest fuel costs in recent memory. According to RAC estimates, diesel averaged 198.79 pence per litre. Petrol prices also rose sharply to an average of 172.92 pence per litre, up from 132.83 pence in late February before the latest Middle East conflict began.

Climate campaigners reacted swiftly to the earnings report. Jonathan Noronha-Gant of Global Witness called it obscene for polluters to cash in on the war’s fallout while civilians suffer. He noted that ordinary people in Europe are struggling to afford heating as winter arrives. Danny Gross of Friends of the Earth added that BP is raking in huge profits while doubling down on gas and oil production and slashing investment in renewables.

BP plans to use the excess cash flow from these earnings to settle remaining liabilities from the 2010 Deepwater Horizon oil spill. Last week, the company announced a deal with the state of Louisiana for a lump-sum payment of $350 million to resolve spill-related claims and coastal damage litigation by local parishes.

This windfall follows similar strong reports from Shell and TotalEnergies, both of which posted their highest profits since 2022. BP is expected to present its first major strategy update under O’Neill on 15 December. Market observers anticipate the plan will outline goals to grow oil and gas production and potentially restart share buy-backs next year.

Part of BP’s reorganization involves selling its North Sea oil and gas assets in a deal valued between £2 billion and £2.5 billion. O’Neill stated in August that there was strong interest in the company’s five major production hubs, including the Andrew and ETAP fields in the central North Sea and the Glen Lyon, Clair, and Clair Ridge fields in the Shetland area. Potential buyers include Neo Next+, Ithaca Energy, and the Adura joint venture.