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BP at centre of a huge row yesterday logo

BP quarterly profit hits record $10bn

• Critics greet results with calls for windfall tax 
• Firm points to improved operational performance

  • The Guardian, 
  • Wednesday October 29 2008

BP was at the centre of a huge row yesterday after unveiling record quarterly profits of $10bn (£6.4bn) – a rise of 148%.

Critics rounded on the oil company, accusing it of profiteering and renewing calls for a windfall tax.

However, City analysts hailed the results, which were about $2bn higher than expected, arguing they showed the impact of operational improvements within BP as well as a higher oil price.

BP responded to the windfall tax calls by arguing it was already the nation’s biggest taxpayer. It said its profits paid for investment in new sources and alternative forms of energy, while its dividend payout was more than 10% of the total dividend income paid to pension funds by FTSE-100 companies. “We are making profits, we are not profiteering,” a spokesman said.

Tony Woodley, joint leader of the Unite union, said the oil companies were “banking money faster than they can count it”, while the Labour MP John McDonnell said he would be calling on parliament “for price controls and profit windfall taxes”.

The row is likely to gain further impetus with Shell due to report its quarterly earnings tomorrow.

Yesterday’s third-quarter figures showed BP’s replacement cost profit – which strips out changes in the value of stocks of oil held within the company – had risen to $10bn in the three months to the end of September. That compared with just over $4bn for the same quarter last year. Stripping out a $1.1bn exceptional gain from non-operating items, profits were $8.9bn.

In July oil hit a record price of $147 a barrel, with BP selling then at an average price of $111. Yesterday oil was trading at just over $60 a barrel.

Tony Hayward, chief executive, said: “Although it has since fallen away sharply, the high oil price of the third quarter obviously helped our absolute result.”

He stressed that operational improvements had made a big contribution. “We are making good on our promise to deliver the strategy we laid out earlier this year: upstream growth, downstream turnaround and corporate simplification.”

Union leaders were less than impressed. Paul Kenny, GMB general secretary, said, “GMB has been calling on the government and the financial authorities to curb speculation in the oil market, which has wreaked havoc in the real economy and stoked up inflation. Now we see the result of this speculation, with BP enjoying huge windfall profits. The public authorities have got to get a grip and stop this speculation.”

Woodley said: “Struggling, worried families will have every right to feel angry that as the temperature plummets, BP’s profits rocket. It is no longer acceptable for government to stand on the sidelines. It is time to put an end to this obscene profiteering.”

George Osborne, shadow chancellor, said that it would be a “scandal” if petrol prices did not start to fall. “BP have absolutely no excuse for not passing on any fuel price falls to customers.”

Without referring directly to BP, the prime minister, Gordon Brown, said: “There has been a more than halving in the price of oil and, just as when the price goes up people see it immediately reflected in petrol pump prices, we want to see the falling price reflected in petrol pump prices and we are determined to see that happen.”

In response to the barrage of criticism, BP said that over the past three years it had paid more than £5bn in tax in the UK and, if fuel, excise duty and VAT were added, the total rose to almost £21bn.

“We are a big company and we make big profits, that’s what we should do,” said a spokesman.

He said the company had to fund a capital investment programme of about $21bn a year and was spending $1.5bn this year on the development of alternative energy. “We are investing in the future.”

BP’s shares rose by more than 5% yesterday to 461.5p.


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