Current Press Releases Oil & Gas UK Statement on Oil Company Profits The first-quarter profits posted today by Shell and BP can be largely attributed to the rising oil price which has increased 17 percent since the beginning of the year and which closed yesterday at just under $117 a barrel for Brent crude.  The financial figures, of course, relate to these companies' far-reaching global operations and not simply to business in the UK. Oil companies do not determine the price of the crude oil they produce.  The oil is sold as a commodity into the global market and its price is influenced by a number of factors, including geo-political conditions worldwide, stock levels in major markets, rising demand in developing countries and the weak dollar. Nor can profits made by the oil companies on exploration and production operations cross subsidise the fuel they sell at service stations. This would be anti-competitive and would discriminate against other retailers who do not have the ability to subsidise.  It would not be allowed by the Competition Commission.  It should be remembered that in the UK, fuel prices are largely made up of the cost of the product and taxes.  For example, according to Wood Mackenzie OPAL (source Understanding Pump Prices at http://www.ukpia.com), the average price paid for a litre of diesel or petrol at the pump last year was made up of around 66% tax (duty and VAT), 28% the international cost of the product, leaving 6% to the wholesaler/retailer for overheads and free cash.  In addition the profits from North Sea production are taxed at a rate of 50 - 75% depending on the field which means that the UK Exchequer is already the single biggest beneficiary of higher oil and gas receipts. World demand for oil and gas is forecast to rise to 2030.  To meet that demand, the industry will have to find trillions of pounds to invest in new exploration, production and refining capacity.  The challenges to find, extract and process new supplies of oil and gas are getting tougher and more costly to achieve; it is essential that oil companies' profits match the rapidly rising costs to sustain long term investment in new oil and gas production. ENDS NOTE TO EDITORS Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry.  Its members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industry's supply chain.  It has 67 members. For further information, please contact: Sally Fraser Oil & Gas UK Media Relations                2nd Floor                                                           232-242 Vauxhall Bridge Road    London SW1V 1AU                                            Tel:       020 7802 2404 Fax:      020 7802 2401 Email:   sfraser@oilandgasuk.co.uk Pager :  07659 183 999 http://www.oilandgasuk.co.uk 29/04/08