Gordon Brown stepped into a growing row about oil company profits yesterday, calling on BP and Shell to spend more of their combined £7bn first-quarter earnings on activity in the North Sea. The prime minister's comments came as lorry drivers took a protest on the soaring cost of petrol to central London, while other motoring organisations and environmentalists accused the oil industry of profiteering at the expense of car drivers and the planet.
"We do need the oil coming out of the North Sea; we do need to encourage the new exploration," said Brown. "That is more expensive to do. That is why I hope that these profits are going to be invested in getting more oil out of the North Sea."
BP raised replacement cost profits by 50% to $6.6bn (£3.3bn) and Shell increased its earnings by 12% to $7.8bn in the first quarter with help from a near-doubling in the price of oil since last year, although both say margins at the British petrol pump are still very slim.
The two companies have been making much of their profit abroad and have been selling off assets in Britain. BP has disposed of its Forties field, as well as Grangemouth and other refineries, and Shell has announced it is cutting 180 jobs in Aberdeen and has put a range of offshore fields up for sale. BP said last night that it was continuing to spend up to $3bn a year in the North Sea developing new fields such as the Rhum gas field and the Clair oilfield but a spokesman believed the North Sea would never be able to compete with the likes of Angola and the US Gulf, where enormous discoveries were still possible.
"You have to have something to spend it on," the spokesman said. "We have been producing in the North Sea since the 1960s at great benefit to the economy but it is a finite resource."
Shell insisted that it was pumping out more oil and gas than ever and blamed financial speculators for driving crude up to nearly $120 a barrel. Peter Voser, the company's financial director, said the weakness of the dollar, political pressures and investors switching from equities to commodities all affected the value of oil, though there was "enough product and enough crude" available.
"We don't understand the oil price at this stage," Voser said, adding that there was no immediate sign of weakening demand as a result of the US economy slowing down. "The fundamentals do not justify the oil price at this level."
Edmund King, president of the Automobile Association, warned that drivers would be shocked by the earnings at a time when they were struggling with high prices at the pump.
"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," he said. "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 the windfall in drilling and refining, to increase the supply of oil and create downward pressure on petrol prices.
Graham Tran, regional officer of the Unite union, joined the attack on the industry. "These profits are a slap in the face for 180 staff at Shell who were told less than seven days ago that they face redundancy," he said. "Both Shell and BP have announced pension holidays for 2008 at a time when our members in Grangemouth are fighting to protect their pension fund."
Friends of the Earth's economics coordinator, Tim Jenkins, said: "Oil companies are making vast profits at the expense of the planet. Ministers should introduce a windfall tax and invest the money in tackling climate change, including a comprehensive energy-efficiency programme to end fuel poverty and cut emissions from peoples' homes.
"Oil firms must also do more to clean up their activities. There must be a fundamental shift away from fossil fuels and much greater investment in the clean, green, renewable solutions that are essential for a low-carbon future."
Richard Griffith, analyst at the City brokerage Evolution Securities, said that yesterday's figures from BP showed that new chief executive Tony Hayward's turnaround plan was "bearing fruit" faster than expected.
The City cheered the performance, pushing Shell's shares 5.5% higher to £20.43, while BP's shares gained 6% to 613p.
"We do need the oil coming out of the North Sea; we do need to encourage the new exploration," said Brown. "That is more expensive to do. That is why I hope that these profits are going to be invested in getting more oil out of the North Sea."
BP raised replacement cost profits by 50% to $6.6bn (£3.3bn) and Shell increased its earnings by 12% to $7.8bn in the first quarter with help from a near-doubling in the price of oil since last year, although both say margins at the British petrol pump are still very slim.
The two companies have been making much of their profit abroad and have been selling off assets in Britain. BP has disposed of its Forties field, as well as Grangemouth and other refineries, and Shell has announced it is cutting 180 jobs in Aberdeen and has put a range of offshore fields up for sale. BP said last night that it was continuing to spend up to $3bn a year in the North Sea developing new fields such as the Rhum gas field and the Clair oilfield but a spokesman believed the North Sea would never be able to compete with the likes of Angola and the US Gulf, where enormous discoveries were still possible.
"You have to have something to spend it on," the spokesman said. "We have been producing in the North Sea since the 1960s at great benefit to the economy but it is a finite resource."
Shell insisted that it was pumping out more oil and gas than ever and blamed financial speculators for driving crude up to nearly $120 a barrel. Peter Voser, the company's financial director, said the weakness of the dollar, political pressures and investors switching from equities to commodities all affected the value of oil, though there was "enough product and enough crude" available.
"We don't understand the oil price at this stage," Voser said, adding that there was no immediate sign of weakening demand as a result of the US economy slowing down. "The fundamentals do not justify the oil price at this level."
Edmund King, president of the Automobile Association, warned that drivers would be shocked by the earnings at a time when they were struggling with high prices at the pump.
"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," he said. "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 the windfall in drilling and refining, to increase the supply of oil and create downward pressure on petrol prices.
Graham Tran, regional officer of the Unite union, joined the attack on the industry. "These profits are a slap in the face for 180 staff at Shell who were told less than seven days ago that they face redundancy," he said. "Both Shell and BP have announced pension holidays for 2008 at a time when our members in Grangemouth are fighting to protect their pension fund."
Friends of the Earth's economics coordinator, Tim Jenkins, said: "Oil companies are making vast profits at the expense of the planet. Ministers should introduce a windfall tax and invest the money in tackling climate change, including a comprehensive energy-efficiency programme to end fuel poverty and cut emissions from peoples' homes.
"Oil firms must also do more to clean up their activities. There must be a fundamental shift away from fossil fuels and much greater investment in the clean, green, renewable solutions that are essential for a low-carbon future."Richard Griffith, analyst at the City brokerage Evolution Securities, said that yesterday's figures from BP showed that new chief executive Tony Hayward's turnaround plan was "bearing fruit" faster than expected.
The City cheered the performance, pushing Shell's shares 5.5% higher to £20.43, while BP's shares gained 6% to 613p.
Source: The Guardian|by Terry Macalister
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