The Guardian (UK): Record profits put oil firms on tax alert: “Martin O'Neill, chairman of the powerful trade and industry select committee, raised the spectre of a fresh tax when he told Shell executives giving evidence on fuel prices that "Shell's profits are beyond the dreams of avarice." (ShellNews.net) 31 Jan 05
Monday January 31, 2005
The government will come under further pressure this week to hit oil companies with a windfall tax as the industry reveals gushing profits.
American group ExxonMobil will start the ball rolling today when it is expected to announce profits of $24bn - the biggest in American corporate history.
It will be followed by Shell on Thursday and next week by BP. Though estimates for the two companies' earnings vary, they are expected to be at the top end of earnings records.
Last week senior Shell executives sought to head off calls for a windfall tax, arguing that such a move would dent confidence in the sector and could lead to job cuts.
Martin O'Neill, chairman of the powerful trade and industry select committee, raised the spectre of a fresh tax when he told Shell executives giving evidence on fuel prices that "Shell's profits are beyond the dreams of avarice."
In response Kieron McFadyen, Shell's director of exploration and production, said he was "deeply concerned" at the notion of a windfall tax.
"I see an impact on investor confidence. I see an impact on activity levels, on project and production levels overall," he said.
The last time the government imposed a windfall tax was in 1997 when privatised utilities were hit with a charge which funded the government's "new deal" programme to help the unemployed.
Oil company profits have been boosted by high demand from China and by continuing political uncertainty in the Middle East. Though the price of oil has retreated from last year's peaks of more than $50 a barrel, threats of production cuts by producers' cartel Opec are still keeping the price high.
Yesterday Opec warned that oil prices, still hovering near $50 a barrel, would remain high throughout the spring. It agreed to keep its production ceiling at 27m barrels a day.
The decision, reached at a meeting of the 11-nation group in Vienna, offers little solace for consumers worried about high fuel prices.
Shell is expected to use Thursday's results announcement to update investors on developments with its restructuring and on whether it will have to reclassify its reserves for the fifth time after auditors called into question the status of 900m barrels of oil and gas stocks.
Shell will hope it can draw a line under the reserves question but analysts say regaining shareholders' confidence will be a long process that will depend on the company hitting targets.
In October, Shell announced plans to merge its UK and Dutch parent companies after nearly 100 years of separate operations.
The move was demanded by investors angered by the reserves crisis, which led to three senior executives being ousted and cost the company £82.7m in fines from American and British regulators.