The Zohan

BBC NEWS | Business | Rising prices boost Shell and BP

Apparently it is not their fault and it is OPEC's for setting the cost - they are victims in all this

My heart bleeds - along with my wallet

PeteBrant

Man, that's a real blow to a company with $7bilion profit in 3 months.

Interesting - Are we at peak oil, then?


Thought not.

Geezer

Why do the British public have such a problem with companies making big profits?

They are not the reason we pay high fuel costs, it's a combination of OPEC and our govt. There margin on fuel is small, why should they cut it any more?

The majority of their profits come from their parts of their business. Good luck to them! Nice to see UK companies doing well.

Geezer

PeteBrant

I don't think anyone has a problem with companies making big profits.

Shell have been fined for commiting fraud and price fixing, so they aren't exactly paragons of just practice.

And there seems to be a big hole in your logic. If they couldn't afford to cut their margain on thier portion of fuel revenue, they wouldn't be making $7billion per quarter in profit would they.

They certainly aren't the only people profiting from the current situation, but neither are they poor innocent companies.

Ghetto Dude3

they wont be making big profits for ever, i dont see why they should cut the margins when its the goverment who shaft the end user.

PeteBrant

When was the last time Shell/BP made a loss, then?

The Government charge 50P per litre plus VAT. Undoubtably the biggest chunk.

Martin2005

Yes but it's not the margin on fuel that is driving their profits is it, it's the margin on a barrel of oil.

Geezer

That just doesn't make sense. You have no idea what profit they make on their fuel. They certainly are not going to sell it at cost or at a loss, and why should they? It's not their fault, simple as.

You have to put the profit into context though, do you know what the annual turnover is? Is there any evidence that they are making more return per pound than lots of other organisations? I doubt they do, but simply because they are such huge businesses, the profits are huge too, and people just assume they are raking it in scandalously.

Whether they can afford to make less profit is a moot point, there is no reason they should, they charge what the market will support, or what they need to to remain competitve.

Geezer

PeteBrant

They patently aren't even close to doing either.
Turnover in 2007 was $284 Billion, with profits of $17.3 Billion -

So around average in term of percentage for a large company one would say.

However. This Quarter points to a yearly profit of £28 Billion. And the turnover for the quarter is up 14%

So rather than maintain the same revenue from fuel, they are making hay while the sun shines. Which you may say "fair enough" to.

But live by the sword, die by the sword. If you are going to say that it is ok for companies not to have an upper celing on what they can sell thier product for, then they can also have no lower floor. meaning that if the price of oil falls at the end of the year as expected - i shall expect to see a mirror effect on the price of petrol - And I am willing to bet that I don't.

They don't charge what the market will support though. They are a prime example of having a captive market, they can charge whatever they like. Shell have already been fined for price fixing, so we know that they are unscrupulous when it comes to what price should be set.

It's not as if people can say "well bugger this, I'm not paying that anymore, I' m going to go over to that other fuel source for transport.... oh.. hang on..."

Companies have a moral obligaiton as well as a pure profit obligation to share holders.


Like I siad, there are all sorts of player that are guilty for prices being what they are, but the Oil companies aren't completely innocent.

fivetide

iTrader: (1)

They apparently make their money on refining the stuff into lovely lovely petrol. Many of these companies are also oil explorers too don't forget so if they charged themselves less for the product they could pass that saving on to us.

5t.

PeteBrant

The fact that Turnover is up 14% and profits are up 50% says that the costs have remained constant, and the increase is purely down to market forces driving the price up. (Basically the weak dollar forcing the price up).

In other words, the difference could easily be passed to the consumer. You keep your profits at around 7% of your turnover, and pass the rest on. Thus reducing prices, and keeping shareholders happy.


We aren't talking about diamond encrusted pants. Fuel is not really a luxury item, it's a pretty basic commodity.

Holy Ghost

**

no hole. forecourt business is wafer thin because the treasury takes such a big bite per litre - fuel at the pumps is not big margin business as i understand it - not for any any of them. they make their money upstream in bulk production, crude, gas, that sort of thing.

The Zohan

Quite, just about everything in our shops is delivered by road, not rail road, in trucks - running on Diesel which has gone up from around 0.90p Feb 07 to 1.18p now. Haulage co' going out of business as they cannot compete with foreign companies not paying stupid prices for fuel and products increasing in cost in the shops = We get double fecked!

Gov't and fuel co's need to get together and sort this out as the price is just too damn high and getting higher by the day!

PeteBrant

Irrelevant. The business as a whole is currently experiencing a 50% increase on Profits from this time last year. That's on a business that was already making a healthy 7% profit on a $284 billion turnover.


The treasury takes 50p per litre. And adds VAT onto the final price - You still have around 40p to account for.. Added to this, that's just the UK, that not everywhere. What the UK charges for fuel is utterly meaningless in terms of what BP or shell charge for fuel.

Ghetto Dude3

no idea but the oil will not last for ever, can you blame them for racking up the pennies?

Bodgit

all this can be applied to the tobacco and alcohol industry too.

because the governement deem these as evil everytime there is an opportunity to raise prices the governement step in and raise duty on them.

Ask yourself this, would you be happy if you ran a successful businesss that the government then decide to tax heavily. Would you be happy with having to keep your prices stable to stop upsetting your clients when the government increases the tax on your product year on year.

People often forget that fuel companies like shell invest heavily on exploration that may fail and cost their company dearly. they are taking a risk and the government are reaping the rewards. Its hardly fair is it?

PeteBrant

No it can't.

Unless you are suggesting that Alcohol and Tobacco are as essential to everyday living as Fuel?

Bodgit

I am glad you agreed with the rest of the statement then

ScoTTyB

I'd disagree. Most of the world get by just fine without it, therefore it is a luxury of the 'rich'.

lordretsudo

Oil companies can't "charge whatever they like" - they don't set prices at all. I don't understand why people find this so difficult to grasp. Prices are set by the markets.

Shell were fined for colluding in France with other companies in order to drive up the price of petrol on forecourts. This is hardly the same as what you're implying (that they can dictate the price of oil). Also, this situation would be highly unlikely in the UK given that the biggest %age of the market here is controlled by supermarkets and not by Shell/BP.

Whatever you think about Shell, BP, etc, you have to face the fact that the global oil price (and ultimately the price at the pump) is dictated by global market forces and not by oil companies. There was a good feature on this very subject on the Channel 4 News at lunchtime, with an analyst explaining how the market works. He also debunked the idea that OPEC could make a big difference by increasing production. There is approximately an extra 0.5% spare capacity that could be utilised, and he added that this would make no difference to the market. Speculation is a big problem, but he reckoned that even if that were taken out of the equation, the price would only fall by a few $'s. The fundamental problem driving prices up is that China, India, etc, are swallowing up huge amounts of a finite resource (like with steel) when a few years ago they weren't.

I should probably admit that I work for an oil company (though not Shell or BP)...

c_maguire

As one of the Truckers' spokesmen on todays' protest said this morning, " we are supposed to be part of the European Union yet we pay 25% more for our fuel than anyone else we are competing against. If I use £10,000 of fuel in a week, roughly £6000 of that goes to the government. "
Any large well managed company, be it Tata Steel or Shell, is going to make sizeable profits. Do I resent that? Not a lot, I don't blame Shell or Tata for any of the crap in my life. I understand why people are unhappy with the price of fuel at the moment but the real focus should be on the difference in price we pay when say compared to France or Germany. And that difference is sitting in the coffers at the Treasury. In the face of protests about the unreasonable costs of fuel in this country you might think those in Government (red-faced as they should be) might be keeping a low profile rather than shovelling out negative propoganda to the media regarding the likes of Shell and BP. Are this Government ever culpable in any way, not likely, it's always somebody else's fault. Here's to hoping when Ken rolls it'll be the start of a landslide and at least some of the crap will stop.
Kevin

ScoTTyB

I live in Germany and petrol is not really much cheaper here, nor France. Scandanavia is more expensive, so overall we're not doing as badly.

Diesel is cheaper in alot of European countries though, especially Belgium.

c_maguire

I travel to France regularly and 3 weeks back diesel was averaging 1.25 Euro/ litre. At todays' rate a Euro is 78p. Therefore in France a litre would be just under £1. Let's call it £1 allowing for some increase in the last 3 weeks. It's currently averaging £1.25 for me so that's 25% for you. They would probably riot in France at our prices but we're not in France are we. The good old British always take it up the **** with a smile on their faces.
Kevin

PeteBrant

I think it depends on the economy and the technology level of a given country. I don't think you can count fuel as a luxury in the UK. In sub saharan in Africa, then possibly, yes.

Do you think the UK could get by without fuel?


Of course prices are set by the markets - But the percentage cut that the oil companies take out of the current £1.15 a litre "pie" could be reduced without any impact on profits as compared to this time last year.

As I said before, turnover is up 14% but profits are up 50%. Has oil become more scarce? Is there more demand than last year? Maybe it is - By the odd percent - But it won't be up 50% or even 14%.

In other words, oil companies are reaping the benefits of a weak dollar - In terms of people buying commodities rather than currency - Of course Gold has seen a similar rise in price for the same reasons. The difference is that Gold most definitely is a luxury item, where as fuel (depending on where you live) isn't.

I can see exactly what you are saying - But it grates that we are paying so much more for the same item under the same circumstances as just 12 months ago. The Government take hasn't increased in terms of duty significantly. Obviously the VAT take has, but thats a function of the rising oil price, as opposed to a deliberate government move.


The other completely seperate thing that drives me up the wall is this (aimed at the franchises):

When the price of oil goes up, forecourts reflect this increase. But, they will not have purchased fuel at this new price - If the price of oil went up to $200 a barrel tomorrow, the forecourts will immediatly put thier prices up - but of course they will have paid for thier petrol weeks ago, they don't buy it on a daily basis.

lordretsudo

Everything you say is fair enough, but why would they consciously choose to reduce their profits? It would be a pretty weird thing for a company to do, and somehow I doubt their shareholders would be too impressed! Unfortunately, I don't think altruism and business go together very well...

john banks

I bought some BP shares as a hedge against rising oil prices and inflation. They had lost me money initially, but I'm very happy today. They pay a good dividend as well. I'll probably only sell them when I buy a house.

Suresh

Euro 95 unleaded is Eur 1.60 a litre in Holland or £1.25 in today's money.
I don't pay for my own petrol, otherwise I'd be whinging like a proper pom!

Holy Ghost

**

irrelevant indeed [do i detect a touch of ire here?] geezer was talking about the nature of the forecourt business. as a line of business, (with its own distinct closed loop of cost/revenue/profit] it is low margin and as i understand it, not central to the core profitability of a major petrochem [the key word here is core]. a commercial business must still be able to make a profit that business, consumer and market will stand. all happily stand the petrochem profit margin.

what the market may not stand, is excessive government tax on top. BP can make as much as it likes. when it comes to prices at the pumps, who is the freeloader? the petrochem [that does all the work] or the government [that squats there like a leech?] i'd say the answer was bleedingly obvious ... and there's the rub for us.

PeteBrant

You're probably right - And the same could be said of the Government - Who could have a sliding scale of VAT revenue from it. I mean the 50p per litre gives you a fixed sum. And presumably there ar eprojections for VAT revenue - Therefore when you get a situation as you have now - then perhaps petrol companies and governments could share the reductions -I mean none of them end up out of pocket as such - But we do.

Meanwhile - On planet Earth ....

Leslie

Flash and his creepy mates will be rubbing their hands in glee at every price rise of course!

Les