Petrol row rages as Shell profits double

Shell racked up $18.6bn in profit last year. But with petrol prices at record levels, it shouldn't expect a rapturous reception.

by James Taylor
Last Updated: 19 Aug 2013
Life is good for Shell at the moment; while arch-rival BP continues to pay the price for events in the Gulf of Mexico, Shell has been well and truly raking it in. It said today that it made an $18.6bn profit in 2010, almost twice the $9.8bn it made the previous year. This included a $5.7bn gain in the last quarter, which by our (admittedly unreliable) maths, works out at a gob-smacking £39m a day. No prices for guessing why: it's benefiting from rising oil prices, which have just topped $100/barrel again. But not everyone's impressed. The City was expecting profits to be even higher. And it's inevitably been drawn into the row over spiralling petrol prices...

To be fair to Shell, most of these bumper profits came from the 'upstream' side of its business, i.e. the bit that gets the oil and gas out of the ground, as opposed to the 'downstream' bit that processes, refines, and resells it afterwards. Shell said today that it managed to boost production by 5% last year - and chief exec Peter Voser says it's on track to hit its target of increasing production by 11% between 2009 and 2012, courtesy of some judicious investment (it's spending another $27bn this year, too). With the oil price climbing ever higher, thanks partly to the upheaval in Egypt - a barrel of Brent crude is now back in three figures - this has, not surprisingly, translated into higher profits.

Equally, it's not surprising that petrol prices have gone up, too. But have retailers gone too far? According to the AA, the wholesale cost of fuel has actually dropped by 2p a litre since January 11 - yet the average price of petrol in the UK has risen to 128.62p a litre. As the Daily Mail points out, that means 'Mondeo Man' is now spending about £90 filling up his tank (and even more if it's a diesel). Shell always claims that it makes very little money out of petrol sales (although it refuses to specify how much, which doesn't help matters). And since about 70% of the total cost of petrol is made up of fuel duties - due to go up again in April - the Government is arguably a more sensible target for the ire of motoring groups. But Shell can’t avoid the row entirely.

Nonetheless, it might seem odd that despite these juicy numbers, and despite Voser's promise that there is 'more to come' from Shell, its share price is still down this morning. One explanation is that its fourth-quarter profits were actually a bit lower than analysts expected – but given that the share price has risen by a quarter in the last year, it might just be that investors have decided to pocket some profit. And who can blame them? After all, they've probably got cars to run too...

Find this article useful?

Get more great articles like this in your inbox every lunchtime