BP Reports $3.3B Profit as Soaring Gas Prices Hit Wallets Hard

BP boasted of $3.3 billion in profits this month as increasing gas prices pressure consumer budgets.

During the same period last year, cost profits were up $86 million for the energy company. BP even reported an increase of 18 percent in their third-quarter figure.

Considering oil prices plummeted last year during the the pandemic, BP is doing remarkably well.

"This has been another good quarter for BP — our businesses are generating strong underlying earnings and cash flow while maintaining their focus on safe and reliable operations," said BP chief executive Bernard Looney.

However, the company warned that gas supply "will remain tight" moving into the winter months, the Associated Press reported.

Oil prices will remain steady if inventory levels are down and customers switch from gas to oil given the sharper price increases in wholesale gas markets, BP explained.

The surging gas and oil prices in recent months have taken a big toll on household bills.

In the U.S., the average retail gas price for all grades in October was at $3.38, according to the U.S. Energy Information Administration. AAA reported Tuesday the average price per gallon was $3.40.

For more reporting from the Associated Press, see below.

BP reports of huge quarter profits
BP profits are recovering post pandemic. The logo of British Petroleum, BP, adorns a petrol station in west London, Aug. 4, 2020. Alastair Grant/AP Photo

Despite the headline profit increase, the company's share price fell around 2% as it took a $6.1 billion hit primarily from the accounting treatment of soaring gas prices in futures markets.

"BP's shares are on the slide thanks to a messy set of third-quarter numbers, marred, just like those of Shell, by accounting losses linked to hedging oil and gas prices," said Russ Mould, investment director at A.J. Bell.

With its underlying finances in better health, the company said it would reward shareholders with a $1.25 billion share-buyback program, which it said will be completed before it announces its full-year results.

Analysts questioned whether that was a good use of money, especially as world leaders have gathered in the Scottish city of Glasgow for a U.N. climate summit known as COP26 where the focus is on how to reduce carbon emissions.

"Generosity in good times is all well and good, but that shouldn't come at the expense of long-term financial stability, particularly given the considerable spending on renewable and low-carbon projects that's likely over the coming years," said Nicholas Hyett, equity analyst at Hargreaves Lansdown in London.

For now, it's clear that the oil business can be extremely lucrative if the price backdrop is favorable. Like others in the sector, BP has benefited from rising oil and gas prices in recent months, compared with last year when they fell sharply following the onset of the pandemic.