Petrol bosses attack Cameron on duty as Shell profits hit $18.6bn

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The Independent Online

The Government's fuel taxes are damaging the economy, and the Prime Minister's mooted solution to spiralling petrol prices is "extravagant" and unworkable, Britain's petrol retailers are warning.

In a letter to the Chancellor, George Osborne, the chairman of the Retail Motor Industry (RMI), which represents two-thirds of UK petrol stations, is calling on the Government to scrap plans for more tax rises in April, or face a drag on economic activity and petrol station closures that could leave rural areas as "fuel deserts".

Prices have already hit record highs this year, reaching 128p per litre of petrol and more than 133p for diesel this week, pushed up by the rising oil price and a double tax boost from the VAT increase and a hike in duty at the start of the year. And inflation running at 4.7 per cent could see April's 1p "real terms" rise add as much as 5p to the price of a litre of fuel, says the RMI.

"Our firm recommendation is that government should now set aside plans for a 1p per litre duty increase 'in real terms' on 1 April as the financial implications are potentially so damaging to the economy," the RMI's chairman, Brian Madderson, wrote to Mr Osborne.

He also poured cold water on the idea of a "fair fuel stabiliser", to balance tax levels against fluctuating oil prices, resurrected by the Prime Minister last month. "Whilst the idea undoubtedly has popular appeal, the reality is that any such mechanism would require detailed investigation, involvement of industry and be both complex and costly to manage," Mr Madderson wrote. "We had hoped that Government might have consulted with industry before making extravagant pledges that, ultimately, may be impossible to fulfil."

Mr Madderson is also sharply critical of the Government's lack of response to previous letters on the issue sent in November, December and January. "It seems impossible to engage with this Government over issues like fuel pricing and taxation that are clearly high in the national interest," he wrote.

Consumer anger at ever-rising petrol prices will be stoked by annual results from oil giant Royal Dutch Shell yesterday showing profits almost doubling to $18.6bn (£11.5bn) in 2010, from $9.8bn the previous year.

Peter Voser, the chief executive, acknowledged the effect of a global oil price averaging $85 per barrel in the final quarter of 2010, compared with $76 the year before. "Fourth-quarter and full-year 2010 earnings were supported by higher oil prices and chemicals margins," Mr Voser said.

The company also benefited from production boosted by 5 per cent to 3.3 million barrels of oil equivalent per day. And oil price rises are not all good news, even for Shell. The group's fourth-quarter earnings of $4.1bn came in below expectations – sending the shares down by 3 per cent to 2,200p yesterday, dragged down by "weak refining margins, pressure on certain regional natural gas prices, and volatility in downstream marketing margins as a result of rising oil prices", Mr Voser said.

The RMI rejects claims that petrol retailers profiteer on high oil prices. Garage forecourts are closing at a rate of 400 per year as margins are squeezed ever tighter, and a number of big companies, such as Exxon and Total, are looking at selling off UK retail networks, the group says.