30th October 2026
The world's major oil companies are enjoying another extraordinary period of profitability, with BP and Shell reporting sharply higher earnings as disruption to international energy supplies pushes up prices and creates exceptionally favourable conditions for parts of the oil and gas industry.
The latest figures have reignited an important debate. At a time when households are struggling with energy costs, businesses are facing higher fuel bills and governments are looking for additional tax revenues, what happens to the enormous sums being generated by the oil industry?
Will the money go towards shareholders through bigger dividends, executive bonuses, reducing company debt or investing in new oil and gas production? And how much will actually find its way into the British economy?
BP and Shell announce bumper profits
BP reported third-quarter underlying replacement cost profit of $8.46 billion on 30 October 2026. That compares with $2.2 billion in the same quarter last year and comfortably exceeded analysts' expectations of $7.33 billion.
Shell had already reported third-quarter adjusted earnings of $10.8 billion, almost double the $5.43 billion recorded a year earlier.
Shell's result was its strongest quarterly performance since 2022, when the energy crisis following Russia's invasion of Ukraine produced extraordinary profits across the industry.
These are enormous sums, although it is important to distinguish between the companies' different accounting measures. BP's underlying replacement cost profit and Shell's adjusted earnings are measures designed to show underlying business performance rather than simply their statutory accounting profit.
Nevertheless, the direction of travel is clear. The major oil companies are benefiting from exceptionally favourable market conditions.
Why are oil companies making so much money?
There are several reasons, and the explanation is not simply that the price of crude oil has increased.
The continuing conflict involving Iran and the disruption to international energy supplies have created uncertainty in global markets.
Oil and gas supplies have been affected by interruptions to production and shipping, particularly around the Middle East. When supplies become less reliable, prices and trading opportunities can change rapidly.
However, one of the biggest contributors to the latest results has been the profitability of refining.
Oil companies do not simply extract crude oil and sell it. Many operate enormous refineries which turn crude into petrol, diesel, aviation fuel and other products.
The difference between the cost of crude oil and the selling price of refined products is known as the refining margin.
According to Reuters, refining margins for Shell and TotalEnergies nearly quadrupled compared with a year earlier. Shell's refining margin reached approximately $42 per barrel.
This is particularly important because a company can make substantial profits from refining even when its own oil production has not increased.
Oil trading is another important contributor. Large companies such as BP and Shell buy and sell oil, gas and refined products around the world. Their trading operations can benefit from volatility, differences between regional prices and changes in supply and demand.
BP's own figures have highlighted the importance of stronger refining margins and trading contributions to its recent performance.
In other words, the companies are benefiting from a combination of higher energy prices, disruption to supply, strong refining margins and their ability to trade in international markets.
What will happen to all the money?
There are several competing demands on these profits.
Shareholders will receive substantial rewards
One of the clearest indications of where the money is going comes from Shell.
The company has announced a $5 billion share buyback programme for the coming months, increasing its previous quarterly commitment of $3 billion.
A share buyback involves a company purchasing its own shares on the stock market and usually cancelling them. This reduces the number of shares in circulation and can increase the value of the remaining shares.
Shell also paid shareholders approximately $2.2 billion in dividends during the third quarter and declared another quarterly dividend of $0.3906 per share.
TotalEnergies has also announced substantial share buybacks.
BP's position needs to be considered separately. Its management has spent much of this year emphasising the importance of strengthening the balance sheet and reducing debt before increasing shareholder distributions.
For investors, dividends and buybacks are attractive because they provide a direct financial return without requiring them to sell their shares.
Reducing company debt
Oil companies have substantial borrowing requirements.
The industry is capital-intensive, requiring billions of pounds or dollars for exploration, drilling platforms, pipelines, refineries, transportation and maintenance.
Companies also need to remain financially strong enough to withstand a sudden fall in oil prices.
BP has been particularly focused on reducing its debt and other financial liabilities.
Its earlier financial statements showed a clear intention to improve the balance sheet and sell assets that no longer fit its strategy.
Strong profits provide an opportunity to do this while still maintaining dividends and funding investment.
Investing in new oil and gas production
Another possibility is that more money will be directed towards new production.
This is an important issue for Britain, particularly the North Sea.
Oil companies argue that the UK needs to maintain domestic production for as long as there is demand for oil and gas. They also argue that investment supports jobs, supply chains, engineering businesses and energy security.
However, investment decisions depend on expected profitability over many years, not simply the profits made during one exceptionally good quarter.
A new offshore development can require billions of pounds and take many years to become operational.
Companies must consider the possibility that oil prices could fall, taxation could change or demand could decline before the investment has paid for itself.
BP has already indicated that it intends to concentrate on assets offering stronger financial returns rather than investing simply because an opportunity exists.
Executive pay and bonuses
There is also the question of executive remuneration.
Senior executives in major energy companies can receive substantial salaries, annual bonuses and long-term share awards.
Company performance, financial results, production targets, safety and shareholder returns can all influence remuneration.
It would be wrong to assume that every additional billion dollars of profit automatically produces a corresponding increase in executive bonuses. Remuneration arrangements are generally linked to a range of performance measures.
Nevertheless, exceptionally strong financial results can influence the calculations behind executive rewards.
This is an area shareholders and remuneration committees will be watching closely.
Will Britain benefit through taxation?
This is where the distinction between international oil companies and Britain's own North Sea industry becomes particularly important.
BP and Shell are multinational businesses. Their profits are generated across numerous countries and business activities.
The $8.46 billion reported by BP is not profit generated entirely in Britain, nor is it money that can simply be subjected to UK North Sea taxation.
The UK taxes profits arising from relevant UK activities under its own corporation tax and oil and gas fiscal arrangements.
The North Sea has a separate tax regime, reflecting the nature of the industry and the profits generated from oil and gas production.
The Government has recently announced plans for a replacement for the Energy Profits Levy, which has attracted considerable criticism from parts of the offshore industry.
Offshore Energies UK argues that delaying the replacement Oil and Gas Revenue Levy until potentially 2030 risks discouraging investment in domestic production.
The industry estimates that changes to tax and regulatory arrangements could help bring forward £50 billion of investment.
That is an industry estimate and should be treated as such, but it illustrates the scale of the argument between government and producers.
There is a genuine policy dilemma. Higher taxes can generate additional revenue when profits are strong, but an unpredictable or uncompetitive tax regime may discourage companies from committing money to long-term projects.
Does any of this help ordinary consumers?
Unfortunately, not necessarily.
The profits being announced do not mean that petrol, diesel, heating oil or electricity prices will fall.
Indeed, the same international disruption that has helped improve the companies' financial performance can increase costs for households and businesses.
There is also a geographical issue. The fact that BP and Shell are major British-listed companies does not mean that all their profits, investments or tax payments remain in Britain.
Their shareholders are international, their operations are global and their investment decisions are made according to commercial priorities.
Britain benefits from employment, taxation, supply-chain activity and investment where these arise from domestic operations, but the relationship between global corporate profits and the UK economy is not straightforward.
A bigger question for Britain
The latest results raise an important question about the future of the oil industry.
When international conditions produce exceptionally large profits, companies have an opportunity to strengthen their finances, reward investors and invest in future energy supplies.
But there is no guarantee that the money will be invested in Britain.
For the UK, particularly Scotland and the North Sea, the challenge is to create conditions in which companies see a commercial reason to invest locally while ensuring that the country receives a fair return from its natural resources.
It is also important to recognise that today's profits may not be repeated. Oil prices can fall just as quickly as they rise, refining margins can narrow and geopolitical conditions can change.
The oil companies are therefore unlikely to distribute every additional dollar to shareholders. They will want to retain financial flexibility for less profitable years.
Nevertheless, the scale of the latest earnings raises legitimate questions about the balance between shareholder rewards, executive remuneration, investment and the contribution made to the countries whose resources and infrastructure help generate those profits.
For consumers facing high energy bills, the figures may seem particularly uncomfortable.
The oil companies are making billions. The question is whether Britain, its workers, its taxpayers and its energy consumers are receiving a proportionate benefit from the wealth being generated.