Fuel retailers are profiteering by refusing to pass on to drivers falls in the price they pay for petrol.
The average wholesale price paid by fuel companies has fallen by 2p since January 11, from 41p to just above 39p.
But prices at the pump have climbed to all-time highs. And in a further slap in the face for British motorists, almost every other European country has seen fuel prices fall.
The price of filling up a tank dropped in Germany, France, Ireland, Holland, Spain, Belgium and Denmark as retailers shared the lower cost of fuel with consumers.
Profiteering: British fuel retailers are refusing to lower petrol prices despite a 2p drop in the wholesale cost
In Britain, one industry insider admitted last night that some retailers are choosing to bank their profits now because they had been suffering from poorer than expected sales in the run-up to Christmas.
Any suggestions of profiteering will enrage drivers, who are being forced to spend more than ever for fuel because of last month’s rise in VAT and petrol duty.
And the difference between the cost to consumers and the price paid by retailers cannot be accounted for by the rise in VAT from 17.5 per cent to 20 per cent.
Warning: BP boss Bob Dudley said the rising cost of oil due to the unrest in Egypt would result in a price increase for customers
Figures from the AA show the average price of a litre of petrol has risen from 127.21p on January 4 – the day VAT and fuel duty went up – to 128.6p at the end of the month. Diesel has increased to 133.2p a litre.
It means that filling up the average 55-litre tank now costs more than £70.
AA spokesman Luke Bosdet said: ‘The fact that we know European retailers passed [the fall] on leads you to only one conclusion: That our retailers are keeping their prices high and enjoying the profits.’
He added that firms were ‘hacking off their nose to spite their face’, pointing to a 3.4 per cent drop in fuel sales in the third quarter of 2010, compared to the same period in 2009.
But Brian Madderson, chairman of the Petrol Retailers Association, said the organisation disputed the figures for wholesale prices, which can be calculated using different measures.
He said the association’s method showed that unleaded petrol had stayed flat, but admitted that even if retailers did agree that prices had fallen, they might still keep the resulting profits.
‘If wholesale prices did go down they might not immediately be passed on to consumers because the retailers have been suffering terribly,’ he said.
‘In the bad weather, margins were very tight, so it might be some time while they repair their finances.’
He added: ‘Petrol retailers are closing at the rate of 400 a year, they are not a charity, they are family businesses struggling for survival, particularly in rural areas.’
The row over fuel costs comes as Chancellor George Osborne considers bowing to pressure from motorists to freeze a 1p fuel duty rise due to take effect on April 1.
The Government is also considering a ‘fuel stabiliser’ which would see duty pegged to oil prices, so that when the cost of a barrel goes up the amount of duty falls, keeping prices the same for drivers.
But Angela Hall, spokesman for the 600,000-strong ‘Keep fuel under £1’ campaign, said the policy would make little difference to hard-pressed motorists.
‘How they can charge anybody £1.30 for a litre is absolutely ridiculous,’ she said. ‘Our members are extremely upset that we’re paying so much, whether through the garages or the Government. It’s just going up and up.’
There are renewed suggestions on the internet of demonstrations outside oil refineries this month.
The boss of BP warned yesterday that the rising price of oil – which reached $100 a barrel this week because of the political upheaval in Egypt – would only add to the woes of motorists.
Bob Dudley said: ‘If oil prices do continue to rise, you would expect to see those prices passed through to consumers, all around the globe.’
Iain Conn, BP’s head of refineries and petrol stations, pointed to the exorbitant taxes placed on fuel in Britain.
He said that the cost of fuel in Britain is the lowest in Europe before tax, thanks largely to the multi-billion barrel reserves of the North Sea.
But the duty placed on fuel – which currently stands at 58.95p per litre – means Britons face some of the highest prices in the world.
The gloomy picture for motorists came as BP unveiled a £3.1billion loss for the year – the oil giant’s first foray into the red for nearly 20 years – largely caused by the cost of its oil spill in the Gulf of Mexico.
BP announces £3.1bn loss as it goes into the red for the first time in 20 years
- Oil firm managed to claw back £12.6billion by selling assets around the world
- Puts up two key refineries for sale in U.S.
BP reported a £3.1billion ($4.9bn) loss as the company counted the cost of last year's oil rig disaster in the Gulf of Mexico.
It was the first time the company had been in the red for nearly two decades - this time a year ago they posted a profit of £8.7billion ($14bn).
But chief executive Bob Dudley said yesterday that the company would resume quarterly dividend payments at seven cents a share (4.3 pence) - half the level they were at before the massive spill.
The return of the payouts is good news for pension holders and investors because before the spill the stock counted for an estimated £1 in every £6 of dividends paid out in the UK.
Silver lining: Although BP posted a £3.1 billion loss there was good news for investors as chief executive Bob Dudley announced that dividend payments are to resume at 4.3p per share
MORE FUEL PRICE MISERY LOOMS AS OIL HITS $100 A BARREL
Motorists face paying even more to fill up their cars after the price of oil hit the symbolic $100-a-barrel mark yesterday.
And to heap more misery on households, analysts said gas prices will follow oil upwards, with this summer’s prices likely to be 10 per cent higher than at the same time last year.
Amid fears that the crisis in Egypt could lead to the closure of the Suez Canal, Brent crude prices rose sharply in London to $101.08.
Although the canal is currently operating normally, traders are fearful supplies of key commodities could be disrupted, including natural gas.
Oil has climbed steadily from $70 a barrel last autumn, but the price is still a far cry from the record of more than $147 seen in July 2008.
Last year they were forced to suspend the payments following the Deepwater Horizon blast which killed 11 workers.
BP said it plans to grow the dividend level over time, in line with the 'improving circumstances of the company.'
Shares dropped one per cent after the results were released but, having fallen from a high of 655p in April to a low of 303p in June, they have steadily climbed back to around 480p.
BP also signalled a shift away from the U.S. today as it revealed plans to put two key refineries up for sale - including the site of a fatal explosion.
The oil giant said the sale of its refinery in Texas City and at Carson, near Los Angeles, California, will halve the firm's refining capacity in the U.S. and forms part of a strategic overhaul of its downstream business.
The 1,200-acre Texas City Refinery, which has a capacity of 475,000 barrels a day, was the scene of a devastating fire and explosion nearly six years ago which killed 15 workers and injured 170 others.
But BP committed to investing in its remaining refining and marketing networks in the country, which include sites in Indiana, Washington and Ohio.
The company also unveiled plans to reshape its downstream business - the oil and gas operations which take place after the production phase - by concentrating on growth in developing and emerging markets.
In the fourth quarter, BP said it averaged around 3.67 million barrels of oil and gas a day - nine per cent lower than the same period in 2009.
It added that in the next six years it plans to start up a total of 32 new projects, expected to contribute an extra one million barrels a day by the end of 2016.
BP has upped its bill estimate to cover the cost of the Gulf of Mexico spill to £25billion in November, but analysts do not expect this to increase and have latched on to recent signs that only half of the £12.6billion compensation fund will be required.
The financial hit from the oil spill will offset underlying replacement cost profits of £13.2billion for the full year. Profits for the fourth quarter are expected to be around £3.1billion.
Light at the end of the tunnel: The financial hit from the oil spill will offset underlying replacement cost profits of £13.2 billion for the full year
ENVIRONMENTAL DISASTER WAS A PR CATASTROPHE FOR BP
The Gulf of Mexico oil spill was the greatest environmental disaster of 2010 and proved equally bad for the fortunes of BP.
The company suffered a public relations disaster after the explosion on the Deepwater Horizon rig last spring which killed 11 people and dumped millions of gallons of oil into the Gulf of Mexico.
Prior to the blast the company was in a strong financial position, recording £8.75billion in profits in the year to December 31.
But the devastating knock-on effect dramatically took its toll on the flagship business.
Investigations are continuing into the rig incident on April 20, but a chain of events including mechanical failures and human error which could explain the explosion, has started to emerge.
Shoddy cement work at the bottom of the well failed to hold gas and oil in its reservoir, which leaked into the casing.
Employees then incorrectly accepted pressure readings in the crucial minutes before the explosion - meaning they did not spot the gas leak.
Further mechanical failures allowed gas to be vented directly on to the rig rather than being diverted overboard - where it ignited.
The disaster killed wildlife, polluted waters and shattered fisheries and tourism along the coasts of Texas, Alabama, Louisiana, Mississippi and Florida and led to an angry backlash against the company.
US President Barack Obama pledged to 'make BP pay for the damage their company has caused'.
Efforts to tackle the disaster were overshadowed by the actions of former chief executive Tony Hayward, who stumbled his way through the crisis with a number of PR gaffes, including his decision to take time out from the disaster to go sailing off the coast of the Isle of Wight.
To cover the cost of the spill, BP has managed to claw back around £12.6billion through asset disposals - by selling interests in Argentina, North America, Egypt, Venezuela, Vietnam and Colombia.
The company has been able to benefit from a gradual increase in oil prices over 2010, which hit $100.07 a barrel last night.
But production is likely to be 10 per cent lower than a year earlier due to the impact of the US drilling moratorium and asset disposals following the disaster, while extended maintenance periods will also impact output.
In the words of new chief executive Mr Dudley, the firm is on a 'journey to re-establish trust in BP around the world - especially the US'.
He is understood to be considering scrapping BP’s production targets in favour of smaller, more exploration-focused operations.
But from an investors’ perspective, the company has started the year relatively well.
The market gave a warm welcome earlier this month to BP’s £10billion deal with Russian oil giant Rosneft to form an Arctic exploration alliance.
The deal gave shares a boost, which after falling from a high of 655p in April to a low of 303p in June have steadily climbed back to 483.7p.
Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.
However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue the new deal breaches its shareholder agreement.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: 'The share price has already rebounded from its 2010 lows, and at the moment the emergency fund appears to be adequately sufficient to counter future claims.
'There is a further cost, however, in building this fund - asset disposals have been made which reduce BP’s capacity in the shorter term.
However, some of this could be regained if the proposed deal with Rosneft of Russia progresses.
'In addition, there are strong hopes that the new chief executive will use the results to announce the resumption of the dividend, albeit at a lower rate than before.'
He added: 'The recent strength in the oil price should prove a tailwind for profits, such that overall the general market voice remains unaltered on BP - the shares are a buy.'
BP last reported an annual loss in 1992, when low oil prices, recession and strategic errors saw chief executive Bob Horton lose his job. The firm lost £458million that year.
But from an investors’ perspective, the company has started the year relatively well.
The market gave a warm welcome earlier this month to BP’s £10billion deal with Russian oil giant Rosneft to form an Arctic exploration alliance.
The deal gave shares a boost, which after falling from a high of 655p in April to a low of 303p in June have steadily climbed back to 483.7p.
Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.
However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue the new deal breaches its shareholder agreement. The dispute will be brought to court in London today.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: 'The share price has already rebounded from its 2010 lows, and at the moment the emergency fund appears to be adequately sufficient to counter future claims.
'There is a further cost, however, in building this fund - asset disposals have been made which reduce BP’s capacity in the shorter term.
However, some of this could be regained if the proposed deal with Rosneft of Russia progresses.
'In addition, there are strong hopes that the new chief executive will use the results to announce the resumption of the dividend, albeit at a lower rate than before.'
He added: 'The recent strength in the oil price should prove a tailwind for profits, such that overall the general market voice remains unaltered on BP - the shares are a buy.'
BP last reported an annual loss in 1992, when low oil prices, recession and strategic errors saw chief executive Bob Horton lose his job. The firm lost £458million that year.
A DISASTROUS YEAR: THE BP RESULTS UNDER SCRUTINY
The financial results from 2010 cover one of the most turbulent period in the oil giant's 100 year history. Here is a breakdown of the key issues surrounding the embattled firm in 2010:
COST TO BP
In its results in November, BP said the cost of the spill was around $39.9billion (£25bn) after it revealed the $32.2billion (£20.7bn) it put aside for the disaster earlier in the year was not enough. This includes the $20billion (£12.6bn) compensation fund set up for victims of the disaster.
THE IMPACT ON SHARES
The company's share price plummeted from a high of 655p in April to a low of 303p in June at the height of the Gulf of Mexico disaster. They have since recovered to 488p as the firm benefited from the appointment of new chief executive Bob Dudley, a deal with Russian firm Rosneft and signs that other countries such as China and Brazil are still willing to work with the firm.
THE IMPACT ON PENSION FUNDS AND INVESTORS
The return of dividend payments comes after they were suspended at the height of the crisis last summer. This is a key development for pension holders as well as investors given the stock is thought to account for £1 in every £6 invested in pensions. The dividend of around seven cents a share is about half of what was paid before the oil disaster.
WHAT HAS HAPPENED TO MANAGEMENT?
After a string of PR gaffes, Tony Hayward stepped down as chief executive in late July to make way for Mr Dudley. Mr Hayward was criticised for a number of verbal slips and for taking time out from the disaster to go sailing off the coast of the Isle of Wight. It was recently reported that Mr Hayward, who is a non-executive director for Russian oil venture TNK-BP, is in early talks about joining the board of commodities trader Glencore.
THE IMPACT ON BP'S REPUTATION
President Barack Obama's rhetoric towards the firm was particularly hostile at first, while activists targeted BP with on-the-street protests, anti-BP websites and social networking campaigns. The appointment of an American chief executive in Bob Dudley has helped the company address some of the flak in the US, alongside a new safety and operational risk unit, a review of pay focusing on safety-led incentives and a review of third-party contractors.
HOW HAS THE REST OF BP'S BUSINESS PERFORMED?
BP pumped around 3.6million barrels of oil and gas a day last year, 10 per cent less than in 2009 due to the impact of the US drilling moratorium and asset disposals following the disaster. Mr Dudley is understood to be considering scrapping BP's production targets in favour of smaller, more exploration-focused operations.
OIL PRICES
The company has benefited from a gradual increase in oil prices over 2010, hitting 90 US dollars a barrel around the year-end. The soaring oil prices have helped BP turn in a profit but before the cost of the disaster is deducted.
WHAT ROLE HAS RUSSIA PLAYED IN BP'S RECOVERY?
Earlier this month BP unveiled a £10billion deal with Rosneft, Russia's state-controlled oil firm. The alliance will see BP take an additional 9.5 per cent stake in Rosneft, while Rosneft will take a 5 per cent stake in the London-based company. The companies will work together to explore the Russian Arctic continental shelf in an area of the South Kara Sea covering about 125,000 square kilometres (48,263 square miles) - one of the world's last remaining unexplored basins.
AND BP'S FUTURE IN THE U.S.?
Mr Dudley said the firm is on a 'journey to re-establish trust in BP around the world - especially the US'. It earns around 40 per cent of its profits in the country. There are fears deals in the Gulf will be hard to come by in the future, particularly as there are a number of ongoing investigations and legal claims in the US, including by the US Justice Department. The Gulf Coast Claims Facility, which also covers clean-up and remediation costs, has paid about $3.4billion (£2.1bn) to 168,528 claimants, mostly in temporary, emergency payments in the past four months.
No comments:
Post a Comment