Bumper profits for oil companies – worth picking a fight?

October 30, 2008

It is not surprising that many people find it thoroughly irritating to read headlines about oil companies, such as Shell and BP, making bumper profits thanks to high oil prices while consumers pay ever more to heat their homes.

With crude oil prices having fallen to around $70 dollars from more than $147 in July even Chancellor Darling felt compelled today to say the recent drop should be passed on swiftly to the consumer,

That’s a noble sentiment but are governments really able to tell corporate giants what to do? Whispers of windfall taxes have come and gone but the government didn’t even introduce one on the utilities.

Restricting companies in a way that could eat into their profits might not be a good idea anyway as some of them account for a large share of the dividends paid to UK pension funds by FTSE 100 companies – a whopping 10 percent in the case of BP, for example.

Moreover, some economists argue that measures such as windfall taxes are a short-termist solution to a permanent problem and thus don’t work.

What do you think? Is it time for the government to stop talking and show some muscle?

9 comments

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People need to remember these are GLOBAL profits and are often reinvested into more research or getting the oil out of the ground in the first place. As usual, Labour are hypercritical, as what is the highest factor on the price at the pumps – Government TAX. When oil was $147/barrel, Darling could have easily reduced duty, but he didn’t. He will further add to the recession if he presses ahead with his car tax increases (budget 08). None of Labour’s tax policies seem to be very well thought through and very short sighted.

Posted by Colin Welch | Report as abusive

I think your missing the point. The oil companies are quick to pile in with price rises when crude prices increase and slow to pass on reduction when they go down. The huge surges in profits are they due to operational efficiencies ? Increased demand despite a global recession. No they are a cynical exploitation of the movement in price. Massive profiteering keeping end user consumer prices high when the base comodity price has dropped. So Shell and bP are taking short term profits whilst fueling a global recession. Well done chaps !

Posted by paul jacob | Report as abusive

WE THE PUBLIC ARE FODDER FOR FUEL,TAXES AND ALL UTILITIES AS THE GOVERNMENT IS SOOOOO INVOLVED WITH KWANGOS ETC. THAT THE VIEW IS TOO DISTORTED FOR THEM TO SEE LET ALONE ACT ON BEHALF OF THE PEOPLE. THE SMOKE SCREENS WILL ALL BE IN PLACE TO ALLOW THE CAR TAX HIKE TO SNEAK IN.
GREED IS THE MANTRA IN THIS COUNTRY NOW.

Posted by margaret dunne | Report as abusive

Such comments can only be aimed at the ‘thick end’ of the electorate.

Anyone with an IQ greater than 10 knows that TAX makes up by far the greater proportion of the pump price.

As for the oil companies, I thank God that there is at least somebody left to create the countries wealth.

Posted by John Ball | Report as abusive

Darling would like to see the oil companies make a reduction for then he would be able to impose another 2p duty on the litre.

Posted by David Butler | Report as abusive

Both comments so far are valid but we need to recall also that these companies have been very quick to push retail prices up when the price of crude rose, not so quick to cut them as it falls.

And it is indeed very fair to say that the Government (how they deserve such a title I do not know) have also been quite happy to profit from what will, I suspect, be seen with hindsight as a turning point in our economic fortunes when they could easily have softened the blow and made the initial stages of the downturn less vicious.

Posted by Richard | Report as abusive

It’s a good thing that SOMEBODY earns some money to keep the country going and pays enough tax to feed the people who earn nothing. Or should we all live on credit?

OH NO!! I FORGOT – WE ALREADY TRIED THAT.

Posted by Jason | Report as abusive

I Think Gordon Brown would dearly love to slap a wind-fall tax on the utility and energy companies. However, I think this feeling is tempered by the knowledge he needs these people for other projects. He wants EDF help with the nuclear power stations and the energy gians for alternative green energy projects (even though shell have already backed out of one in London).

Posted by Arthur Blundell | Report as abusive

To focus solely on the profit is to forget about tomorrow. Before criticising their behaviour, I’d like to know how much of that profit they need to invest to keep going. By all accounts exploration & the development of finds have become more expensive. They could also do with upgrading their refineries.

Posted by Graham | Report as abusive