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Results for oil giants BP and Shell won’t help their popularity

Expect to see a gush of black, sticky and highly toxic opprobrium to be poured over BP and Royal Dutch Shell this week.

Both oil giants, always candidates for a caning by the self-righteous brigade, can expect it to be laid on good and hard, especially if, as predicted, they announce a combined profit of some £8 billion in the third quarter.

At least it will be take some pressure off the banks – for a few days, at least.

BP, which reports its Q3 results on Tuesday is expected to report profits of £4.2 billion, a rise of 130 per cent over the same period last year.

Shell will follow on Thursday with a figure somewhere in the £4.6 billion ballpark, which would represent a rise of about 46 per cent, the analysts have calculated.

So, with pump prices (again) falling at a slower rate than crude prices, protests will be shrill and sustained.

The July-August returns, though, are likely to represent the high water mark for the oil industry.

Crude hit $147 a barrel in July but was last week bobbing around the $60 mark.

At the forecourt, prices that were once hovering close to 120p per litre of standard unleaded, are now generally back below £1. Those are figures that will inevitably trickle through to BP’s and Shell’s fourth quarter results – but at a price.

Falling crude prices have given risen to worries about oil companies’ earnings and dividend prospects, as well as their ability to fund investment projects across the oil and gas industry.

Two points to make here.

One, dividends are crucial element of the income of pension funds and private investors.

Second, with energy becoming a precious resource, any reduction in exploration and product development is bad news.

Gordon Brown is already flailing around, threatening the oil companies with the Office of Fair Trading if they do not pass on falls in crude prices to consumers at the rate he deems desirable.

And in the current febrile climate, it’s a turn that’s likely to go down well with an electorate that’s under pressure from all quarters.

But there’s more at play here than perceived profiteering.

Opec, the oil-producers’ cartel that has had the western world over a barrel for far too long, is threatening to cut production in response to falling prices.

Expect pump prices to start going north again any day soon.


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