Shell unveils £1.5m-an-hour profit

Graeme Evans,Alan Jones
Thursday 31 January 2008 09:06

Royal Dutch Shell reignited anger over excessive profits today after revealing it made $27.6 billion (£13.9 billion) in 2007 - a new record for a UK company.

The figure - equivalent to more than £1.5 million an hour - prompted a fresh call from unions for a windfall tax on oil companies. It also comes at a time when motorists are paying forecourt petrol prices of more than £1 a litre.

Royal Dutch Shell's profits haul for 2007 was 9 per cent higher than a year ago and comes after the price of crude oil rose towards 100 US dollars a barrel.

The Unite union said profits in the industry were "obscene" and urged the Government to take action, especially because of rising energy prices.

Joint general secretary Tony Woodley said: "Shell shareholders are doing very nicely whilst the rest of us, the stakeholders, are paying the price and struggling."

Mr Woodley said that amount of money, added to oil industry profits he put at more than £50 billion in the last three years, was "quite frankly obscene".

He added: "This Government took the brave step of putting a windfall tax on the greedy privatised utilities to fund the New Deal. With pensions injustices still to be addressed, fortune should favour the brave again and the greedy oil companies should be asked to contribute for the common good."

The oil firms, including Shell, argue that they make very little money from forecourt operations, adding that they already pay high levels of tax to the Treasury. In 2005, Chancellor Gordon Brown increased a North Sea tax on energy companies from the 10 per cent he introduced in 2002 to 20 per cent.

Today's figures benefited from a better-than-expected finish to 2007, with fourth quarter profits ahead 11 per cent at $6.68 billion (£3.36 billion). That was higher than consensus forecasts for a figure of around $5.82 billion (£2.95 billion).

The boost came from exploration and production, with the division posting earnings of $4.87 billion (£2.45 billion), against $3.54 billion (£1.78 billion) a year earlier.

This reflected the impact of higher oil and gas prices on revenues, which was partly offset by lower production volumes, higher taxes and rising costs.

Shell has also ratcheted up capital spending to seek out new sources of oil and gas, with chief executive Jeroen van der Veer selling off maturing assets to "rejuvenate" the oil major's portfolio.

He said today: "Overall these are satisfactory results. We made good progress in 2007, launched new projects upstream and downstream, and achieved exploration successes."

AA spokesman Andrew Howard said the responsibility of the oil companies was to produce enough oil to meet world demand.

A windfall tax would just mean more money going to the Government, and less spent on exploration and building new refineries, he said.

"It's a little bit unfair to criticise the oil companies.

"The world market decides oil prices, not the oil companies.

"It's the world market that leads to oil companies making big profits."

Countries such as India and China, which do not produce their own oil, were pushing up the price through increased demand, he said.

"The oil companies need to reinvest this profit back into securing future supplies, and hopefully pushing prices down. They need to explore new oil fields and build more refineries so that there is no shortage in world supply.

"The key measure is whether, when the world oil price comes down again, petrol prices come down as fast as they went up when the oil price went up. That will show whether the oil companies are profiteering."

He added: "What the Government can do is not put 2p on a litre in April. But every time the fuel price goes up the Government makes its own windfall."

Kate Gibbs, spokeswoman for the Road Haulage Association, said: "Everyone that works, works to make a profit, but the profits announced today are above and beyond.

"If the general haulier tells you he is breaking even then he is doing well. A lot of them are operating at a loss because they have to keep passing on the price of fuel. What we would like to see is something taken off the pump price, but we don't live in a perfect world."

She said hauliers could not face another 2p on the price of petrol in April.

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