- The Washington Times - Wednesday, April 30, 2008

From combined dispatches

LONDON — Royal Dutch Shell PLC and BP PLC, Europe’s two biggest oil producers, posted forecast-exceeding first-quarter earnings yesterday as a result of record crude prices that are expected to bolster profits across the industry.

The combined profits of $17 billion reignited calls for a windfall tax on oil profits as consumers struggle to pay for food and fuel.

British Prime Minister Gordon Brown suggested that some of those profits should be reinvested in costly exploration for new oil reserves in the North Sea.

Also yesterday, legendary energy investor T. Boone Pickens said energy stocks will go higher because prices don’t account for the effects of $100 a barrel oil.

“There’s an equity play,” the billionaire Mr. Pickens said on CNBC. “Energy equities don’t reflect $100 oil. They reflect $70 oil. Once oil is established at $100 they will go up.”

Oil prices won’t fall below $100 a barrel because global supply continues to be outstripped by growing demand, he said.

BP posted a 63 percent surge in first-quarter net profit to $7.6 billion, while Shell reported a 25 percent rise, to a record $9.08 billion.

Revenue at BP jumped 44 percent to $89.2 billion, while sales at Shell soared 55 percent to $114 billion.

Last week ConocoPhillips reported a 16 percent rise in net income to $4.14 billion. Like BP and Shell, the third-biggest U.S. producer far outpaced expectations. More big profits are expected from the biggest two U.S. companies, Exxon Mobil Corp. and Chevron Corp., when they report first-quarter earnings later this week.

Crude oil for June delivery dropped $3.12, or 2.6 percent, to settle at $115.63 a barrel in New York, the lowest close since April 17. It was the biggest one-day decline since March 31. Futures surged to a record $119.93 a barrel Monday.

The enormous profit reports from European companies coincided with the end of a two-day refinery strike in Britain that shut off 700,000 barrels of oil per day, brought from the North Sea to a BP plant.

Truck drivers staged a protest in London’s Park Lane yesterday, blaring their horns to protest a 30 percent rise in the price of diesel over the past year. A similar protest took place in Washington Monday.

Shell’s Chief Financial Officer Peter Voser said oil companies are not to blame. “We don’t understand the oil price at this stage,” he said. “The fundamentals will not justify an oil price as we see it at the moment.”

Shell’s earnings from oil production rose 52 percent to $5.14 billion, due almost entirely to the price increases. The company said combined production of gas and oil equivalents increased by less than 1 percent to 3.4 million barrels per day, as a 9 percent rise in gas production outweighed a 6 percent fall in oil production.

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