As some of you may know, I’ve been popping up on various radio programs talking about Oil Companines. Yesterday, a researcher BBC 3 Counties Radio called me up and asked me in the light of the recent profits from Shell, and the underlying profit of BP, why weren’t we seeing lower prices at the pumps from “the falling cost of oil”.
My reply was that the oil price hadn’t fallen, it had risen from $72 to $82 in the last 6 weeks or so. Secondly, this is priced in dollars. Some of this recent rise has been offset by a rise in Sterling from $1.42 to $1.52, which is why pump prices had remained broadly stable. Oil had, in fact been rising steadily since 2009. The last time petrol was below £1 per litre, Sterling was buying $1.65 and the oil price was $52. Indeed, the rise in Sterling since the budget probably represents a tax-cut sufficient to offset the future rise in VAT. Indeed that alone demonstrates the foolishness of “Keynsian” stimulus as followed by President Obama, and why Coalition style cuts would lead to a richer country.
Furthermore, I said, trying to blame the oil companies for the price of petrol was like blaming farmers for the price of bread. The cheapest petrol around will be sold more or less at cost. The profit being made in the shop, which is why, if you do see ‘pay at pump’ machines, they’re always disabled. Of the £1.129 per litre of the cheapest petrol 57.19p is fuel duty, 10.01p is VAT on that duty, 6.8p is the VAT on the fuel, and just 38.8p or 34% is the cost of the fuel.
That 38.8p pays for the exploration, drilling, extraction, transport, refining, delivery and storage of that fuel. There may be a penny or so profit for BP or shell, but probably not at the cheapest petrol stations. The lion’s share of the £70 from a typical tank of petrol goes to the Government, which means that more is probably spent on out-of-work benefits by the Government from your tank of petrol than goes to BP or Shell, indeed more is probably spent on national defence out of your tank of petrol than goes to their profit.
“Ohh, I hadn’t realised that”. They had clearly wanted an analyst to confirm their prejudice against business and the profit motive. The same questions are asked every time these public companies release numbers. The same answers are given: that excess profit will be competed away, and that margins are very, very low.That there is no conspiracy against the public.
This is bias. It is not a party political bias, but a cultural and econmic one, which betrays a leaning to discredited economic theories which are supported by the party membership of the Labour party: that ‘profit’ is distorting. That ‘profit’ discracts from the business of delivering service to customers, and that the Shareholder interest should be secondary to that of the customer. That ‘profit’ represents the difference between what you do, and what you should, pay.
Of course this is not the case. Look at the queues outside the cheapest petrol station in your local area: people will save a pound or two per tank and be prepared to wait for 10 minutes to do so. It pays the company to offer petrol at cost, and scalp whatever profit it can from the overpriced sweets and chocolate (and on valentine’s day, mother’s day and your wife’s birthday, flowers) you buy in the shop. There is no conspiracy against the public, there is brutal competition for business, and in the petrol business, that means cutting costs and delivering your petrol cheaper than Q8, Texaco, Esso, or the supermarket.
But the BBC didn’t want to hear that. So they ‘ran out of time’ for my slot. Oh well.
https://bracken.uk.com/wp-content/uploads/2010/08/Oil-Price.jpg238320Malcolm Brackenhttp://bracken.uk.com/wp-content/uploads/2017/07/logo-2.pngMalcolm Bracken2010-08-05 08:31:002017-07-21 01:44:09Oil Companies, Profits and BBC Bias