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8:58pm UK, Monday March 02, 2009

Luke Taylor, Business Producer

The Chairman of Shell UK has told Sky News that even his family ask him to explain what’s behind the price of petrol.

James Smith Chairman of Shell UK

Mr Smith defended Shell’s green credentials

Speaking to Sky News Business presenter Jeff Randall Mr Smith that, between the tax take and inflation, the price we pay on the forecourts is a fair amount.

“The price of petrol has come down by 30p since the peak last summer, and if you take the oil price and adjust for inflation, all of the oil price reductions have flowed through to the customers.”

The price of crude oil spiked in July at almost $150 a barrel, with the price at the pumps here hitting a record average of around 120p per litre.

Shell Grangemouth 

Shell has 900 forecourts in the UK

But since the economic downturn reduced global demand has meant the price of crude oil has collapsed – falling by as much as two-thirds.

Many have called for oil giants like Shell, who this year reported profits of more than £13.9bn, to cut the price of fuel further.

But Mr Smith that public often don’t see price reductions because of the amount of tax that is placed on petrol.

“Price reductions get passed on quickly and less than 10% of Shell’s profits are in the UK – of the profits we do make its all from offshore energy, there is hardly any profit to be made at the pump.

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Jeff Randall red chevron

See interviews with key business and political figures by Sky’s Jeff Randall

As the economic downturn seems to intensify, Mr Smith agreed that 2009 was going to be a difficult year but said that firms need to keep investing through the tough times.

“A bell will not ring when we hit the bottom of this recession, if it did it would mean you would know when to cut back – that’s why it’s so important we keep investing and respond to the long-term nature of our business.

Mr Smith also defended Shell’s green credentials and decision to pull out of a project to build Europe’s biggest largest off shore wind farm projects.

‘My Family Even Ask Why Petrol Prices Are High’

Shell withdrew from the London Array project which will see 271 wind turbines built 12 miles off the Kent and Essex coasts is expected to cost £3 billion.

Once complete, it will generate up to 1,000 megawatts of electricity – enough to power 750,000 homes.

Mr Smith said: “Whether its investment in fossil fuels or renewable energy the economics have work, if they don’t it undermines your capacity.

“The world is going to need more energy, but it also needs less Co2 – an awful lot of coal is going to be burnt.

“We have spent hundreds of million dollars developing clean coal technology, I believe the time has come for this technology.”