Despite a fall in oil and gas production of 2% over the quarter as demand from consumers dropped, sky-high oil prices more than made up for the shortcomings. Oil prices have doubled over the last year, consistently hovering around $100 a barrel since February.
Shell isn’t the only company to report surging profits on the back of soaring gas prices. UK oil and gas producer BG Group reported on Wednesday that earnings for the second quarter had risen by 27% to $1.12bn on last year. Even beleaguered BP, which has faced a year of criticism over its handling of the oil spill in the Gulf of Mexico last year, managed to recuperate losses and posted underlying profits of $5.6bn earlier this week (but there’s still talk of a break-up.)
All three companies blamed unrest in the Middle East and Africa for rising oil prices - Libya’s daily output of 1.2 barrels has been shut down for months as civil war grips the country. But while oil companies have survived the turmoil, the future’s not looking so bright for energy suppliers.
Centrica, the owner of British Gas, reported today that operating profit had fallen by nearly a fifth in the first half of the year. Operating profit was £1.2bn – a drop from £1.56bn the same time last year. Political unrest was partly the reason for the turnaround in fortunes, pushing wholesale gas prices higher, as was the Japanese earthquake. Even the British weather was blamed, as unusually hot weather took hold over Easter.
Unsurprisingly, the fall in profits means a price rise for consumers - someone’s got to take the pain and it won’t be the producers. British Gas is preparing to raise gas prices by 18% and electricity prices by 16% next month. But while customers feel the squeeze, shareholders are lining their pockets. Centrica’s dividend has increased by 12% - enough to make you wish you’d hung on to Sid’s shares.