'Obscene' Shell profits as petrol costs soar

Record oil prices helped Shell to an unprecedented £14bn profit last year - but it's not all good news...

Last Updated: 31 Aug 2010

The Anglo-Dutch giant made a profit of $13.3bn in the fourth quarter of 2007, as the price of crude oil soared towards $100 a barrel. That meant its annual profits jumped 9% to $27.6bn – the highest figure ever recorded by a UK company. Barely able to contain his excitement, chief executive Jeroen van der Veer called it a ‘satisfactory’ performance. Trust him to get carried away.

And it won’t be the last; all of the big oil companies are reporting in the coming days, and all of them are expected to announce big profits (even the beleaguered BP). ExxonMobil, which is due to report tomorrow, is expected to report annual profits of nearly $40bn. That’s about £55m for every single day of the year.

Naturally, not everyone’s impressed. Tony Woodley, the head of the TGWU union, said the profits were ‘obscene’ at a time when the rest of us were struggling. His progressive solution is to impose a windfall tax on ‘greedy’ companies like Shell, though no news yet on what he wants to do with the proceeds (give it to Gordon Brown, perhaps?).

These record profits come at a time when petrol prices are soaring (it currently stands at well over £1 a litre in the UK), so it will inevitably lead to accusations of profiteering at our expense. But as motorist groups have pointed out, it’s not really Shell and co’s fault that petrol is so expensive. About two thirds of the money we spend on unleaded goes straight into the Treasury’s pocket – and the Chancellor Alistair Darling is planning to add another 2p to fuel duty in April. Now he’s coming under pressure (something he must be used to by now) to cancel this hike – which was, after all, planned at a time when oil prices were much lower.

As for Shell, it might be wise to enjoy this while it can. It’s very possible that high oil prices are just papering over the cracks in the industry – production costs are soaring, everyone’s selling their reserves faster than they can replenish them, and they’re making less money from refining. So if the oil price starts dropping (as it has done in recent weeks), it could have a big impact on the bottom line.

In other words, this could be as good as it gets. Oh well.

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