How are energy companies in the UK going bust but also having colossal profits?

Question

Last 2021 and early 2022, a large number of energy companies in the UK went bust.

Now all that is on the news is how the UK Government are going to impose a windfall tax on energy companies because their profits are soaring.

How do these two things happen at the same time?

In: 23

Answer 1

Price of oil and gas vary a lot, but the cost of doing business and the amount purchased locally stay relatively consistent.

So when the global demand for oil and gas is low because there are no major wars but there is a pandemic where everyone suddenly drives their car less oil and gas prices are low and you operate at a loss.

When everyone starts driving to work again and there is a war causing a shortage just as demand picks up oil and gas prices are at record highs but the costs of getting it out of the ground and delivered locally are exactly the same as before so your local energy company is now operating at record profits.