Page last updated at 16:03 GMT, Tuesday, 29 April 2008 17:03 UK

Rising prices boost Shell and BP

Shell petrol station pump
Shell reported record UK profits in January

Oil firms Royal Dutch Shell and BP have made better-than-expected first-quarter profits thanks to the rising price of oil, which is close to $120 a barrel.

Shell made profits of $7.8bn (3.9bn) in the first three months of the year, up from $6.9bn a year ago.

And rival BP saw its profits rise 48% to $6.588bn (3.31bn), from $4.4bn.

In January, Anglo-Dutch firm Shell reported annual profits of $27.56bn (13.9bn) for 2007, a record for a UK-listed company.

BP shares closed up 5.96% in London, while Royal Dutch Shell 'A' shares rose 5.26%.

Price moves

The quarterly results come amid increasing concern at the cost of petrol on both sides of the Atlantic.

HAVE YOUR SAY
Oil company profits are justified but the governments slice of the cash we pay per litre is not
Peter, Aylesbury, UK

In the UK, average prices have now reached 109.8p a litre for unleaded petrol, equivalent to 4.99 a gallon (4.55 litres), according to the AA.

In the US, where fuel taxes are lower, the average price is now $3.60 (1.80) for an American gallon (3.79 litres), according to the US Energy Department.

The results also follow a strike by oil workers at the Grangemouth refinery in Scotland, which had disrupted fuel supplies and halted much of the UK's North Sea oil production.

Some petrol stations in Scotland and northern England had introduced rationing or raised prices.

The price of oil prices has been rising steadily since January, when it broke through the $100-a-barrel mark.

This week the cartel of oil producing nations, Opec, warned that prices could reach $200 a barrel.

On Monday, US light, sweet crude hit a fresh record of $119.93 a barrel. Prices rose as traders eyed the disruption caused by the Grangemouth strike and supply problems in Nigeria following pipeline attacks.

However, the oil price slipped to $117.64 a barrel in Asian trade on Tuesday.

Difficult year

Shell chief executive Jeroen van der Veer said he would continue to grow the firm after a "good operating performance".

Shell shares are listed in the UK and the Netherlands, while the company's headquarters are in The Hague.

BP petrol station

BP's strong figures come after 12 months of turmoil for the firm, which announced a fall in 2007's annual profits in February. At the time it also announced that it was to cut 5,000 jobs.

Other low points have included receiving a $50m fine for the 2005 Texas City refinery explosion in which 15 people died.

This was part of a larger $373m fine by the US Department of Justice for committing environmental crimes and fraud, and included a fine for price manipulation.

And in May last year, the company's boss, Lord Browne, resigned after lying to a court in an attempt to block stories about his private life.

'Oil scarcity'

For a litre of petrol costing 108 pence, approximately 33 pence goes to the oil company, 9 pence to the retailer, 50 pence fuel duty to the Chancellor of the Exchequer, and 16 pence VAT to the chancellor.

Simon Wardell, oil analyst at Global Insight, said the rising price of petrol was "predominantly down to high oil prices".

"Oil prices are high because of the weak dollar and because reserves are under pressure, there is a slim spare capacity margin - Opec does not have a great deal more oil to pump," he said.

"That scarcity is reflected in the high oil prices."

But he said that oil firms could not sit back and just watch the profits flow in.

"Oil firms have to think about the long-term investment, and what prices might be in the future."

The earnings results come ahead of other earnings data in coming weeks from industry figures including US giants Exxon Mobil and Chevron, UK gas firm BG Group and France's Total.


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