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Daily Telegraph: Oil price ‘driven up by speculators and politics’

By Russell Hotten
Last Updated: 12:18am BST 26/10/2007

Peter Voser, finance chief at Europe’s biggest oil company, Royal Dutch Shell, warned the industry not to bank on record crude prices to drive revenues in the future, calling predictions that the price per barrel would hit $100 “too speculative”.

He said the oil price was being driven up by speculators and political factors, rather than any fundamental problems with production and supply.

“To be honest, we find it hard to explain the oil prices,” said Mr Voser.

He was speaking yesterday as Shell unveiled an 8pc fall in third-quarter profits to $6.4bn (£3.12bn) on a cost of supply basis, an industry measure of underlying earnings, due to lower refining margins and sales.

The figures were ahead of analysts’ forecasts.

Mr Voser said Shell’s investment strategy over the past couple of years was aimed at positioning the Anglo-Dutch company to “take full advantage of the higher oil prices… So in those areas we’ve caught at least some of the upside.”

But, while making no predictions about future oil prices, he added: “At the end of the day you don’t see anybody queuing for gasoline or any shortages. Inventories are well supplied and refining margins have been lower, which is an indication of a well-supplied market.

“From that point of view, the price seems to be driven by some speculation and also has a political premium in it,” he said.

This was a reference to fighting on the Iraq-Turkey border and tension between Iran and the West over its nuclear programme.

Shell’s earnings from refinery operations in the quarter were $2.15bn, up more than 70pc from a year ago.

However, Shell said refining earnings were inflated by a rise in oil prices between the time the oil was pumped out and when it was refined — the opposite was true a year ago. On a comparable basis, refining earnings fell 24pc to $1.65bn.

Production of oil and gas fell by 3.4pc from 3.25m barrels of oil or equivalents per day to 3.14m.

That led to a 6pc drop in production earnings to $3.51bn. Production earnings were still near record highs due to the price of crude oil.

Shell’s selling prices were above $70 a barrel in the quarter, up from around $65. Brent crude was trading above $86 a barrel yesterday – a fresh all-time record. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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