Between April and June, Shell's net income fell 8 per cent, to pounds 1.18bn. Taking the first half of the year as a whole, however, earnings rose by 15 per cent, to pounds 2.9bn.
In the latest set of bad results from the industry, Shell's chem icals' income collapsed by 54 per cent in the second quarter, to pounds 184m. John Jennings, the chairman, admitted that chemicals were "struggling" and that profits from the core chemicals businesses had risen only slightly in recent months. He added, however, that "prudence would call for a view of the second half of the year as simply a repeat of the first half".
The impact of the industry-wide crisis in chemicals earnings would have been worse had it not been for the unexpected rise in oil prices.
Shell's targets are based on a price of $15 (pounds 10) for a barrel of Brent Crude, but the severe winter in the Northern hemisphere and historically low US stocks of oil briefly pushed prices through the $20 barrier.
In the second quarter of the year, Shell's oil sold for an average of $19.50. As a result, earnings from oil exploration and production jumped by 44 per cent, to $670bn. The company said the possibility of Iraqi oil coming on stream later this year had largely been discounted by the market.
The petrol price war in the UK continued to take its toll on refining businesses. Admitting the war was still "raging", Mr Jennings said Shell needed to make further cuts in back office costs to compensate for extra money spent on advertising and promotions.
Esso started the price war earlier this year with its campaign to match the lowest price of petrol in a local area. Like most rivals, Shell is selling petrol in Britain at a loss, and joined competitors in predicting a further industry rationalisation, including more closures of rural garages. Mr Jennings said the supermarket petrol outlets had "had a spectacular run" and were "selling petrol at prices which are very, very hard, if not impossible, to match".
Another factor in Shell's drop in second quarter earnings was the strength of sterling. The stronger pound knocked pounds 60m off second quarter income, compared with a gain of pounds 77m in the first quarter.
Summing up the results, Mr Jennings said, "I'm reasonably happy ... but there's still a long way to go before I'll be content."
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