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Fuel Prices, Oil Profits Hitting Highs

Posted on: Thursday, 4 August 2005, 18:00 CDT

AS FUEL prices hit record highs, the three biggest oil companies have reported a combined $600 million profit last year.

Yesterday, BP, Mobil and Shell again raised petrol prices -- a litre of unleaded 91 is now $1.40. Petrol prices have rocketed up 24% this year to $1.40 a litre for unleaded 91, and there are signs the high prices may be knocking sales of big cars.

Official records show BP, Mobil and Shell, the biggest companies by sales, all increased profit by at least 66% in the year ended December 2004.

Consumer advocates say healthy profit rises across the board only strengthen the claims of little real competition in the industry.

David Russell, from the Consumers' Institute, said, "the cries of poverty that have come from the companies over the last 12 months are not grounded in fact".

"We're supposed to have competition in the oil industry and yet they seem to act so much in unison," National's transport spokesman, Maurice Williamson, said.

Representatives from both BP and Shell said the market was competitive, and volatile international oil prices meant the profit margin remained under pressure, despite increasing profits.

Shell's petrol sales division made $106.2 million for the year, up 66%.

Its oil production arm, which owns part of the Maui gas and oil field, nearly tripled its profit to about $376 million.

BP's profit of $53.7 million was an increase of 138% on 2003.

Mobil also had a good year, with a $61.6 million profit, up 87%. Caltex has yet to file its result.

Mr Russell said the result showed the companies were not reliant on the international market, but were using fluctuations in the spot price to raise the pump prices.

"I'm surprised the Commerce Commission hasn't had them for collaboration because they seem to work as a group," Mr Williamson said.

He also said the volatility in crude oil prices meant oil companies moved quicker to raise prices, but were slower to reduce them.

"They can argue all they like about the oil prices, in the end the true measure is their profitability," Mr Williamson said.

Transport Minister Pete Hodgson could not be reached for comment.

BP's control and assurance manager, Peter Knipping, said: "The amount of money we're collecting off the motorist is increasing less rapidly than the cost we're paying to the suppliers of our petrol . . . and business continues to be very competitive."

Oil prices have continued to rise since the end of 2004 and have now hit record highs as the price of crude oil remains above $US60 a barrel. In December 2004, a litre of 91 unleaded fuel cost $1.11; yesterday the AA Petrolwatch reported an average July price of $1.38 cents a litre in the main centres.

Rising petrol prices are one of the leading causes of inflation, and with increasing electricity bills are the main contributors to an increase in household costs.

There has been a shift to smaller cars as high petrol prices take a bite out of new big car sales.

Sales of big cars such as Commodores and Falcons were down sharply in July, figures from the Motor Industry Association show.

Compared with the average monthly sales for the previous six months, Commodore sales were down by 30% and Falcons by 20%.

Source: Daily News; New Plymouth, New Zealand

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