BP and Shell made an eye-watering combined profit of £7.2bn in the first three months of the year, as the surging cost of oil drove petrol prices to almost £5 per gallon (probably more, by the time you read this). Shell’s profits were up 12% to a record £3.9bn, while BP’s profits were up 48% to £3.3bn – both well above market expectations. They’re now planning to ramp up their dividends to shareholders (by 11% and 31% respectively).
It’s certainly been a good time to be in the oil business. The price of oil broke through the $100-a-barrel mark in January and has kept on climbing – it nearly hit $120 yesterday due to supply concerns following the Grangemouth strike and unrest in Nigeria (OPEC boss Chakib Khelil now thinks it might eventually top $200). And for beleaguered drivers across the country, that means that every time we get to the pumps, the price seems to have ticked up a little further.
All of which is handy if your name’s Tony Hayward. The new BP CEO has been busy overhauling the organisation since taking over from Lord Browne last year, cutting costs and stripping out management layers – so he’ll probably be grateful that margins are shooting up without any input from him (the profitability of BP’s North Sea operations has rocketed by a quarter, for example). Of course he’s been playing down the impact of his reforms today, suggesting that they’re unlikely to bear fruit until the end of this year. But one thing’s for sure: the oil price is making his overhaul a lot easier than it could have been….
It’s fair to say that a four-year-old could probably make money running an oil company at the moment. But there were some encouraging signs from two of our biggest corporate behemoths (albeit we have to share Shell with the Dutch). Hayward is starting to see margins improve at BP's US refineries, while Shell is seeing an increase in new production – it’s now churning out the equivalent of 3.52m barrels a day, up from 3.51m last year.
Naturally, there’s bound to be outrage about the oil companies posting massive profits when we’re paying record prices. But at least BP and Shell shareholders are raking it in, right?