London, March 5, 2026, 08:32 GMT
- UK finance minister says the Middle East crisis has clouded the outlook for winding down the windfall tax, making its end date tougher to call.
- The levy stays in place unless oil and gas prices fall under specific thresholds.
- Cornwall Insight expects the household energy price cap to jump roughly 10% in July.
BP Plc’s outlook for the North Sea windfall tax just got murkier. Finance minister Rachel Reeves signaled that the timeline for lifting the levy is now in question, citing renewed energy price volatility tied to the Iran conflict.
This comes at a tricky time. Higher oil and gas prices might pad earnings, but the tax still bites—and with household bills rising, political pressure is only getting louder.
Speaking to oil and gas executives this Wednesday, Reeves said ongoing Middle East tensions have complicated efforts to pinpoint an end date for the Energy Profits Levy — though she maintained her pledge to scrap it. The levy, first applied in 2022 after Russia invaded Ukraine, ramped up the total tax burden on North Sea producers to 78%. According to Reuters, it will stay in place until both oil and gas prices dip under certain thresholds, which are reviewed regularly. 1
After the latest surge in wholesale markets, those thresholds are looking even more distant. According to Cornwall Insight, Britain’s domestic energy price cap could climb by roughly 10% this July—hitting 1,801 pounds for average users, up from 1,641 pounds in April—as gas prices in Britain jump more than 70% from last week, driven by Middle East shipping snags and the suspension of Qatari liquefied natural gas exports. “This latest forecast … illustrates how exposed UK households remain to international market movements,” said Craig Lowrey, a principal consultant at Cornwall Insight. 2
Regulator Ofgem’s cap restricts how much suppliers can charge per unit on standard variable tariffs—it doesn’t cap the full bill. The agency reviews the cap quarterly and plans to reveal the July to September figure by May 27. 3
BP’s balance sheet worries are getting tangled up in the tax fight. The oil major halted its quarterly share buybacks back in February, after taking roughly $4 billion in writedowns tied to renewables and biogas assets. That freed up cash for debt paydown, pushing net debt to $22 billion by the end of Q4, according to BP. “These are the accounting consequences of the discipline,” CFO Kate Thomson told Reuters. 4
BP isn’t the only one feeling the pinch. Shell, along with North Sea operators like Harbour Energy and Serica Energy, have also been hit by recent shifts in UK tax policy. Reuters points out that after the earlier changes, the top-line tax rate on upstream work in the UK now ranks among the steepest worldwide. 5
BP’s shares slipped 2.38% in London trading on Wednesday, closing at 4.81 pounds—lagging behind the FTSE 100’s performance, MarketWatch data show. 6
Still, things can turn quickly. A steep drop in oil and gas prices could trigger the levy’s switch-off clause—relief for company cash flow, though headline profits would almost certainly take a hit.
For now, geopolitics and politics set the tone. BP shareholders and rivals are eyeing whether the Middle East shock lingers—and just how fast the government moves on consumer relief with the July price-cap call coming up.
