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The Guardian: Union leaders brand Shell’s record £14bn profits obscene

· Claim that gains made at expense of environment
· Company’s plans to go into Iraq spark controversy

Terry Macalister The Guardian, Friday February 1 2008

Shell recorded the biggest annual profits in British corporate history yesterday at $27.6bn (£14bn) causing a storm of protest from trade union leaders and green groups who said the “obscene” profits came at the expense of motorists, pensioners and the environment and suggested it should be met with a windfall tax.

The world’s second largest quoted oil company said it had no intention of cutting back on its operations, saying it needed to increase production to meet rising demand and unveiling controversial plans to start oil operations in Iraq.

Jeroen van der Veer, Shell’s chief executive, denied criticisms from the Unite union saying most of its £1.5m an hour earnings came from upstream global crude production “and not at the gasoline pump in the UK”. A large part of the petrol price could be attributed to taxation over which the company had no control and any cross-subsidy from one part of the business to another would be effectively “killing yourself”.

A windfall tax against the oil industry called for by the unions and the environment group Friends of the Earth would be counter-productive: “Any additional tax – if significant – [means] we can invest less and over time it will impact on our production,” he said.

But Tony Woodley, joint general secretary of Unite, said that a special tax was needed for “greedy” companies such as Shell whose profits were more than four times higher than another company that faces a backlash for its successful expansion: Tesco.

“Shell shareholders are doing very nicely whilst the rest of us, the stakeholders, are paying the price and struggling,” said Woodley. “Record profits of over £13.5bn at Shell and cumulative oil industry profits in excess of £50bn in the past three years are, quite frankly, obscene. It is time the government acted.”

Tony Juniper, director of Friends of the Earth, said: “The chancellor must introduce a windfall tax in his March Budget, and use the money to improve energy efficiency in people’s homes. Such a scheme would benefit the millions of householders who can’t afford to heat their homes, save people money and help tackle climate change … The government must show that it means business on climate change.”

Motorist organisations are complaining about pump prices soaring to more than £1 a litre. Although the government tax take makes up much of that price, the Road Haulage Association described Shell’s level of earnings as “absolutely scandalous”.

But Van der Veer argued that Shell was investing $26bn this year and needed this capital expenditure to halt a slide in output after reporting a decline in oil and gas output for the fifth year in a row.

The company refused to predict output rates for 2008, blaming a variety of uncertainties such as the weather, disruption in Nigeria and the price of oil, which affects volumes under some government joint ventures.

Shell, whose reputation was dented when it overstated its reserves to the US financial regulator, is making serious preparations to enter Iraq.

The Shell boss declined to comment on suggestions that its future involvement there would fuel the “oil for war” theory that surrounded the British and American military involvement.

He said his company, as an Anglo-Dutch group, expected no special favours for what would be a purely commercial move. “We have to win [approval from Iraqi ministers] because we offer the best solutions,” Van der Veer said.

Meanwhile Van der Veer described the group’s overall performance for 2007 as “satisfactory”, saying it had benefited from launching new oil and gas projects but had suffered in the last quarter from weak refining margins.

“We are proceeding with the rejuvenation of our portfolio with investment in new legacy assets and through disposals. The execution of our strategy is on track.”

The Shell boss said the company was facing a 10% annual increase in inflationary costs but shrugged off any reduction in energy demand as a result of any US or global economic slow-down. “We expect year 2008 to have higher energy demand in the world than in 2007,” he added.

The full-year profits at Shell were 9% up on last time while last quarter’s figures were up 11%. No details were provided of the profits made from petrol sales . Despite these gains financial analysts remained unimpressed. “[The results] will do little to assuage concerns that large integrateds are unable to capture record prices,” said Peter Hutton at NCB brokers. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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