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Lanka Business Online: Jackpot: Oil companies rub hands over price jackpot while consumers fume

24 April 2006 09:52:18

Oil companies rub hands over price jackpot while consumers fume


PARIS, Apr.24 (AFP) – While governments and consumers weep over the rise and rise of fuel prices, oil companies are rubbing their hands in glee.


Last year the world's 250 top oil companies earned profits totalling 243 billion euros (300 billion dollars), a 35-percent increase on 2004, and that in spite of hurricanes in the Gulf of Mexico that undermined production, according to figures from French brokerage Aurel Leven.

With the new record highs in the price of crude, which topped 75 dollars a barrel for the first time ever in New York on Friday, these companies are guaranteed an even better harvest this year.

Analysts, who in February were predicting an average price over the year of 55 dollars a barrel, subsequently upped their forecasts to above 60 dollars.

They could raise their sights still further if the current price surge continues, said Aurel Leven analyst Christian Parisot.

The world's largest oil group, US giant ExxonMobil, posted a profit in 2005 of 36 billion dollars on turnover of 371 billion.

That is more than the gross domestic product of Saudi Arabia, the world's top oil producer.

The global number two, Anglo-Dutch company Royal Dutch Shell, broke the all-time profit record for a British firm in 2005, raking in 22.94 billion dollars.

Just behind Shell, France's Total made 15 billion.

According to a study by Moody's credit-rating agency, the 13 largest oil companies in the world gave around 100 billion dollars back to their shareholders.

But while the latter are smiling from ear to ear, consumers at petrol stations are pretty disgusted by the massive profits the big bosses are making.

Last summer, fuel topped the symbolic price of 1.50 euros (1.9 dollars) a litre in many European countries.

In France, where 65 percent of the price of petrol is tax, Finance Minister Thierry Breton tried in autumn 2005 to put pressure on oil companies to delay passing on crude price hikes to motorists.

He was convinced, he added, of the necessity for the oil giants to invest substantially in production, refining and research into alternative energy sources — something that largely fell by the wayside in the years of low oil prices.

Consumers are making similar demands in some countries.

In the United States, there is increasing clamour for oil firm profits to be taxed.

Democratic Senator Hillary Clinton asked President George W. Bush to create a special fund to help increase the States' energy independence, fed in part by such a tax.

In Britain, Chancellor Gordon Brown stepped in in December 2005, increasing the tax on profits gained by North Sea oil firms from 10 to 20 percent.

In France, consumer association UCF-Que Choisir is calling for Total to pay a one-off tax of five billion euros, to be creamed off its “astronomical” profits, which would be invested in public transport.

The oil companies are fighting back, pointing precisely to the fact that they are now, thanks to this manna, in a position to boost investments.

And the International Energy Agency — whose 26 member nations include the home countries of the world's three largest oil firms, the United States, Britain and France — tends to side with the boardrooms.


The oil companies' profits are “big in absolute terms but in proportion with their assets” and “not any bigger than those of other industrial or commercial activities”, said IEA executive director Claude Mandil.

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