High price of fuel sees BP's profits tumble as travellers curb trips

Oil and gas production declined as BP sold off oilfields and assets to pay for the Gulf oil spill

The profit BP makes from producing fuel tumbled by more than half in the first quarter as pilots, captains and drivers in the UK and across the world reacted to rising prices by significantly cutting back on their journeys.

As the UK pump price hovers close to record levels, BP's fuel division, which makes petrol, diesel and other propellants for cars, ships and planes, reported a $924m (£570m) profit for the period, significantly down from $2.2bn a year earlier.

This contributed to a 13 per cent decline in BP's first-quarter profits, sending its shares down by 3.7p to 441.3p.

The FTSE 100 giant also suffered from a 6 per cent decline in oil and gas production – excluding its TNK-BP Russian joint venture in Russia – in the first quarter to 2.45 million barrels a day, as it continued to sell off assets to raise money to pay the billions of dollars it owes in fines and compensation for the Gulf of Mexico oil spill.

The declines in BP's output and fuel profits outweighed the benefits of a strong oil price in the first quarter, which averaged $118.60 a barrel during the period, 12 per cent higher than a year ago.

Despite the slump in profit, BP paid out a dividend of 8p a share for the period – the same level as for the previous three months and 14 per cent up on a year earlier.

BP is keen to grow its dividend after reinstating it 15 months ago following a six-month suspension as the company struggled with the financial fall-out of the Gulf of Mexico oil spill.

However, even with the recent hikes, BP's dividend is barely half what it was at its peak before the spill in April 2010, when the group's pay-outs accounted for £1 in every £6 of dividends paid to UK pension funds.

Although BP's main production business benefited from the high oil prices, profit margins at the company's fuel operation suffered because it was unable to pass on the full cost of the increase to customers.

This is partly because any price rise will reduce demand, especially when customers are already strapped for cash, but also because the emergence of so-called super-refineries in Asia have increased competition.

With oil prices set to remain high, austerity likely to continue and competition intense, analysts said that BP's refining business would remain under pressure for the foreseeable future.

Furthermore, they were also concerned that BP would report further production declines in the second quarter of the year, as it continued selling off oilfields.

BP's profit slump contrasted with Shell's announcement last week of an 11 per cent jump in profits during the same period.

Meanwhile, ConocoPhillips, the US oil company, reported a 1 per cent decline in profit and ExxonMobil an 11 per cent drop.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own