"Chancellor of the Exchequer Rishi Sunak announced a 25% levy on oil and gas production earnings, raising the headline rate of tax to 65% from 40%."
A 65% tax rate.
The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff is just sure that a 65% tax rate will do wonders for expanding oil and gas production in the North Sea.
Imagine dropping hundreds of millions of pounds to explore a prospective site in the harsh North Sea environment just to find the ocean floor field is dry. And after striking out enough times to the tune of billions of pounds, which is common in offshore exploration, you finally hit one with oil and gas.
Then the government moves in and takes 65% of whatever you have left after the costs not only of production, transport, financing costs, regulatory compliance, sales and marketing, permits, royalties, and duties, but of all your previous failures as well.
Well the most marginal prospective sites, the ones E&P companies thought were barely worth the risk at the old tax rate, are sure to be scrapped now.
And that'll really help with the global supply problem.
It's a sad policy reversal.
Boris Johnson had previously announced plans to expand North Sea energy production in light of lower Russian deliveries to Europe, but the British press reports he has been politically weakened by a Covid party scandal from 2020 and is now throwing out populist bones to appease the opposition as well as a large share of the British public that still doesn't understand supply and demand.
Read more at S&P Global: "UK oil, gas windfall tax will 'drive away investors,' hit North Sea supply: industry chief"