Call for windfall tax on Shell's 'obscene profits

Royal Dutch Shell sparked calls tonight for a share of its “obscene” profits to be subject to a windfall tax after the giant hauled in £14bn (€18.8bn) last year.

Shell’s 2007 earnings figure – a record for a UK-listed company – emerged as UK motorists paid an average of 104.32p a litre at the pumps.

The motoring organisation AA joined union Unite and Friends of the Earth in pressing the Government to consider imposing measures on the oil sector, particularly given the social impact of rising energy prices.

Edmund King, the AA’s president, said: “It has to be accepted that high oil prices have been spurred on largely by market speculators, rather than petroleum companies.

“However, there are problems with fuel supply predicted for the future and the AA would like to see some of the petroleum companies’ profits windfall spent on reducing that threat.”

Royal Dutch Shell made a surplus of US$27.6bn (€18.7bn) in 2007, equivalent to more than £1.5m (€2m) an hour and 9% higher than a year ago.

It benefited from crude oil prices of more than US$90 (€121), a factor which at the same time forced up forecourt prices.

Calling the profits figure “obscene”, Unite joint general secretary Tony Woodley said: “Shell shareholders are doing very nicely whilst the rest of us, the stakeholders, are paying the price and struggling.”

He added: “This Government took the brave step of putting a windfall tax on the greedy privatised utilities to fund the New Deal. With pensions injustices still to be addressed, fortune should favour the brave again and the greedy oil companies should be asked to contribute for the common good.”

Friends of the Earth director Tony Juniper added: “Shell is making vast profits from its climate-changing activities. The Chancellor must introduce a windfall tax in his March Budget, and use the money to improve energy efficiency in people’s homes.”

Shell rejected the windfall tax calls, arguing that the profits figure is matched by the amount of money it spends on securing new energy sources. Most of its earnings haul comes from exploration and production, rather than from selling petrol on UK forecourts.

Chief executive Jeroen van der Veer described the company’s 2007 performance as “satisfactory” as Shell made progress in launching new exploration projects.

Shell said rising oil and gas prices were partly offset by lower production volumes, higher taxes and rising costs.

It has ratcheted up capital spending to seek out new sources of oil and gas, with chief executive Jeroen van der Veer selling off maturing assets to “rejuvenate” the oil major’s portfolio.

He added: “If you get additional taxation, in the end it means you can invest less. The money has to come from somewhere and over time it will impact on our production.

“I think that you should not only look at the profits size, but at the size of the companies and the huge investment tasks we have to do for the future of our companies.”

The oil firms – BP reports annual figures on Tuesday – insist they already pay high levels of tax to the Treasury. In 2005, Chancellor Gordon Brown increased a North Sea tax on energy companies from the 10% he introduced in 2002 to 20%.

Independent charity the RAC Foundation said anger over rising petrol costs needed to be directed towards the Government, adding that a flexible fuel duty would compensate for varying crude prices.

Acting director Sheila Rainger said: “At the end of the day, Shell is a private company and its job is to make profit.

“The people that could do something about this are the Government. Petrol in the UK is very cheap compared with the rest of Europe when you take away tax.

“The problem is the 70p in the pound that goes to the Treasury. We would like to see the Treasury being a bit more creative in how it’s taxing petrol.

“We would like to see something like a fuel duty stabiliser. At the moment, whenever the price of crude goes up, the cost goes straight through to the motorist.