Oil giant BP has posted its highest annual profit in eight years as ordinary Brits brace for a record rise in the price of energy amid the cost of living crisis.

The British company revealed it raised a mammoth $12.8 billion (£9.5 billion) in profit for 2021 as it cashed in on the surge in wholesale oil and gas prices that has sent household bills soaring.

It notched up £3.01 billion of profits in the final three months alone, which was better than expected and up from just £85.1 million a year earlier.

BP also announced more cash returns for shareholders after recovering from a torrid 2020, when the pandemic sent it slumping into the red following record annual losses.

Labour said the figures demonstrated the need for a windfall tax on gas and oil profits.

Energy prices shot up as economies worldwide reopened following the early stages of the pandemic and demand increased. But while firms extracting gas recap mammoth profit hauls, households and businesses are struggling as energy suppliers pass on the increased costs of buying gas to them.

The sharp rise in wholesale gas prices led to energy regulator Ofgem raising the cap that limits what suppliers can charge consumers in England, Scotland and Wales by nearly £700 last week.

The increase means that the average household will end up paying £1,971 a year, almost double what bills were just a year ago.

On the same day that was announced, oil giant Shell reported a hefty spike in profits.

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Calls are now growing for a windfall tax on energy firms, with Labour and Liberal Democrat MPs arguing that while households are paying through the nose for gas the companies which extract that gas are reporting massive profits.

Ed Miliband, Shadow Secretary of State for Climate and Net Zero, said: ‘BP’s results yet again demonstrate the case for a windfall tax. The boss of BP described the energy price crisis as a cash machine for his company – and the people supplying the cash are the British people through rocketing energy bills.

‘In these circumstances, it is only fair and right for oil and gas producers to contribute to helping the millions of families facing soaring inflation and a cost of living crisis.’

Brits face a number of financial pressures this year, including rising food, broadband and mobile phone costs as inflation rises to a 30-year high, with the Bank of England forecasting it will hit 7.25% in April.

On top of that, the government has resisted calls to scrap the rise in National Insurance in April to help pay for the NHS.

With energy bills also rising, it is feared two in five Brits will be forced to choose between heating and eating in the cod months ahead.

Supporters of the windfall tax believe some of this money should be reclaimed to help struggling households cope with the increase, but Chancellor Rishi Sunak has so far rejected the proposals.

He has proposed what critics are calling a ‘buy now pay later scheme’.

Under the government’s plan, a one-off discount of £200 will be given to every home to help mitigate the worst of the energy crisis.

Energy suppliers will apply the discount on people’s bills from October with the government meeting the cost in full. But it will have to be automatically repaid from people’s bills in £40 instalments over the next five years.

Mr Milliband said: ‘The Chancellor is completely out of step with the mood of the country in rejecting a windfall tax. His buy now pay later scheme for the energy spike will just push the costs onto future bills, and the government has no plan to create a more secure and sustainable energy sector for the future.

‘It tells you everything you need to know about where this Government stands that they won’t take the action necessary to help people through this crisis.’

Liberal Democrat leader Sir Ed Davey added: ‘It simply cannot be right these energy companies are making super profits whilst people are too scared to turn their radiators on and terrified there will be a cold snap.

‘A windfall tax is the best way to get money to the people who need it quickly, but also to make sure there is some sense of trust and proportionality in the system.’

Meanwhile, Greenpeace branded BP’s 2021 profits as a ‘slap in the face to the millions of people dreading their next energy bill’.

BP did not comment directly on the windfall tax calls, but a spokesman said that ‘for every £1 that we earn in the UK, we are spending £2 out to 2025 and beyond’.

The group announced plans alongside its results to boost investment on low-carbon and renewable energy.

Chief executive Bernard Looney said: ‘2021 shows BP doing what we said we would – performing while transforming.

‘We’ve strengthened the balance sheet and grown returns, we’re delivering distributions to shareholders with 4.15 billion US dollars of buybacks announced and the dividend increased, and we’re investing for the future.’

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