Just get over it oil giants make a lot of money
I AM no fortune teller but I want to make a prediction: there will be a wave of righteous indignation at the “obscene” amount of money the oil majors BP and Royal Dutch Shell will make while good honest Britons are struggling their way out of the recession. Now, I’m not accusing some newspapers of lazy journalism but answer me this. How many times do we have to read about how much money per second the oil barons are squeezing out of a barrel of oil while the honest, hard-working Joe-Public is paying top dollar at the pumps?
Indeed, expect the usual gaggle of politicians to jump on the bandwagon again and call it a national disgrace if BP or Shell have the temerity to earn the expected billions with their third quarter numbers. Under CEO Tony Hayward, BP made $25.6bn (£15.7bn) last year and tomorrow is set to report a quarterly net income north of $3bn. Shell, under new CEO Peter Voser, will post similarly large profits on Thursday. For investors, and let’s not forget governments, the oil majors and the broader industry are a key, and reliable, source of income at a time when revenues on both a personal and national levels have been scythed by the recession. Dividends from the oil and gas industry are over a quarter of all those paid to investors in the UK. A figure estimated by Cazenove earlier this year to be over £14bn out of a total pot of £55bn.
And for Alistair Darling and other finance ministers around the globe good profits from the oil industry are essential. According to OPEC, its members make a very respectable $669bn a year from oil sales. A huge figure yes, but not quite so huge as the average $684bn a year from oil taxation that G7 countries receive.
The UK government last year received around 1.8 times more taxation than OPEC member countries obtained from the sale of their oil.
Steve Sedgwick is a presenter on Squawk Box Europe each weekday morning on CNBC.