Weak oil prices injure Shell

Petrol prices have come down in line with crude oil

Anglo-Dutch oil giant Shell has become the latest oil company to report a sharp drop in profits because of the falling crude oil price.

Competing firms such as ExxonMobil and TexacoChevron have already reported a similar drop, and arch rival BP is expected to suffer a similar fate.

Shell's profits during the three months to September reached a healthy $2.69bn, despite the 17% decline when compared with the same three months a year earlier.

The world's biggest energy companies all depend heavily on securing a large chunk of their revenue from the sale of wholesale crude oil on the international markets.

Turning to gas

This leaves the firms very exposed to the ups and down of the commodity markets and the efficacy of the oil cartel Opec in shoring up prices.

Many traditional oil companies, including BP and Shell, are desperately trying to move their business away from oil and into cleaner fuels such as gas or alternative fuels such as wind energy.

While gas is now contributing a significant proportion of Shell's revenue, the wholesale gas market has suffered from being somewhat arbitrarily pegged to the price of oil in many regions of the world.

This means that gas prices have moved lower alongside oil, rather than offset oil price weakness.

Shell's results created very little stir in the markets, since it was already clear that the average price of a barrel of crude oil had dropped more than 20% against the average price a year earlier.

Shell's shares had moved 5p lower to 510p at 1330 GMT in London trading.