£7bn profit for oil giants as £5 gallon arrives

Click to follow
The Independent Online

BP and Shell fuelled the anger of UK motorists today after the two firms racked up combined profits of more than £7 billion in three months.

The AA said drivers would be shocked to learn of the £3.3 million-an-hour first quarter earnings, at a time when rising oil prices had left them struggling with average unleaded petrol prices of around £5 a gallon.

The companies argue that while record oil prices inflated returns at their exploration and production divisions, tougher conditions were felt in downstream operations such as refining and marketing. The pair also insist they already pay high levels of tax to the Treasury.

Today's figures were way ahead of City forecasts and caused shares in both companies to jump by 5 per cent on the London market. Shell's profits were 12 per cent higher at 7.78 billion US dollars (£3.92 billion) while BP improved 48 per cent to 6.59 billion US dollars (£3.32 billion).

In January, Royal Dutch Shell re-ignited calls for a windfall tax after it announced annual profits of £14 billion.

AA president Edmund King said today: "The motorist feels somewhat battered from all sides, seeing the oil companies going off with cash in their pockets and the Treasury filling its coffers.

"It's the ordinary motorist that's bearing the brunt of this while the oil companies and the Government are laughing all the way to the bank."

He called on the oil companies to reinvest more of the windfall in drilling and refining, in order to increase the supply of oil and create downward pressure on petrol prices.

Independent charity the RAC Foundation said anger over rising petrol costs needed to be directed towards the Government, adding that a flexible fuel duty would compensate for varying crude prices.

BP's said it was paid an average of 90.92 US dollars a barrel for its oil in the first quarter, compared with 53.43 US dollars a year earlier.

Analysts said BP's profits were higher than expected, but added it was too early to call a turnaround after performance difficulties in recent years.

New chief executive Tony Hayward recently outlined plans to add up to 4 billion US dollars (£2.01 billion) to the oil major's profits through a far-reaching overhaul of the business.

The company revealed a 22 per cent fall in 2007 profits to 17.29 billion US dollars (£8.76 billion) earlier this year but Mr Hayward said BP now had a "clear, step-by-step plan" to close the gap on rival Shell.

Mr Hayward wants the firm to boost profits in the next three to four years through restoring and upgrading BP's problem-hit US refineries. Its Texas City refinery was rocked by an explosion which killed 15 workers in 2005.

Stockbroker Charles Stanley's Tony Shepard said BP was "still not firing on all cylinders", but that its operational turnaround looked to be on track.

He added: "At last, it appears that BP is beginning to improve its operational performance and this looks set to drive a stronger financial performance in the second half."