The UK government has set a price floor on its windfall tax on oil and gas producers in a move expected to reduce the tax burden on the industry. The price floor will be $71.40 a barrel for oil and 0.54 pounds per therm for gas. If prices fall below these levels, the tax rate will fall back to 40% from 35%.
The government says the price floor is necessary to prevent the tax from discouraging investment in the North Sea oil and gas industry. The industry has argued that the high tax rate could reduce output, making the UK more reliant on imports.
The price floor will be in place for two years, after which the government will review it. The government is committed to ensuring the UK has a secure and affordable energy supply.
Due to the notable rise in energy costs, the windfall tax was implemented in May 2022 after Russia’s invasion of Ukraine. The tax has raised £2.8 billion so far.
The oil and gas industry has welcomed the price floor. The Oil and Gas Authority said it was “a welcome step” to ” help ensure that the UK remains competitive in the global energy market”.
However, some environmental groups have criticized the price floor, arguing that it will do little to address the climate crisis. The Green Party said the price floor was “a green light for continued fossil fuel extraction”.
The government has said it is committed to reducing carbon emissions and that the windfall tax will fund investment in clean energy.
The price floor will be in place until March 2028, when the windfall tax is due to expire. The government said it would review the price floor before then to ensure it is still appropriate.
The oil and gas industry has welcomed the price floor. The industry body, Oil and Gas UK, said the move was “a positive step” that would “help to protect investment and jobs in the North Sea”.
However, the price floor has been criticized by some environmental groups. Friends of the Earth said the move was “a missed opportunity” to raise more money to fund the transition to a low-carbon economy.
The government has stated that the windfall tax is temporary and will be reevaluated later. It remains to be seen whether the price floor will be maintained beyond March 2028.
The oil and gas industry has welcomed the price floor. The industry body, Oil and Gas UK, said the move was “a positive step” that would “help to protect investment and jobs in the North Sea”.
However, the price floor has been criticized by some environmental groups. Friends of the Earth said the move was “a missed opportunity” to raise more money to fund the transition to a low-carbon economy.
The government has said that the windfall tax is a temporary measure that will be evaluated at the appropriate time. It remains to be seen whether the price floor will be maintained beyond March 2028.
Here are some of the key points about the price floor:
- The price floor will be set at $71.40 per barrel for oil and 0.54 pounds per therm for gas.
- If prices fall below these levels for two consecutive quarters, the tax rate will be reduced from 35% to 40%.
- The price floor will be in place until March 2028.
- The government will review the price floor before then to ensure it is still appropriate.
The price floor is a compromise between the government’s desire to raise revenue from the oil and gas industry and the industry’s concerns about the impact of the investment tax. It remains to be seen whether the price floor will be enough to encourage investment in the North Sea oil and gas industry.
