Record-breaking Shell makes 'almost nothing' at pumps
UK-owned Shell’s record results come at a time when motorists in Britain face petrol prices of about 90p a litre at the pumps.
But experts said companies such as Shell and BP – which is also expected to announce record profits next week – make “virtually nothing” on petrol station forecourts.
In fact, the biggest winner at the pumps is British Chancellor Gordon Brown, who takes a whopping two-thirds of the price of petrol in tax.
Nick Vandervell, of the UK Petroleum Industry Association (UKPIA), said: “Before tax, fuel prices in the UK are among the cheapest in Europe.”
AA Motoring Trust petrol price analyst Ruth Bridger also absolved oil companies from profiteering, saying: “We are not being ripped off at the pumps.”
Fuel duty is set at 47.1p for every litre of unleaded petrol and diesel while VAT is a further 17.5%. When the average price of petrol was 79.6p in January last year, the UK Treasury took 74.1%. According to UKPIA, only 58% of the cost of a litre of petrol went to the Treasury 10 years ago.
At today’s price of 90p a litre – up from a 2005 average of 87p – the Treasury takes 60.5p or 67% while it costs the garage 23.2p to buy the petrol.
That leaves a gross retail margin – the difference between the cost price to the distributor and the selling price to the customer – of just 6.3p or 7%, which has to cover the cost of running the petrol station.
Ms Bridger said: “If a garage makes as much as a 2p profit out of a litre of petrol that is a lot. The majority make between 1p and 2p. It is a very tight margin industry and they are making virtually nothing at the pumps.”
The buying power of supermarkets has stopped petrol prices rising even further despite the soaring cost of oil.
Oil prices jumped from below $45 a barrel to about $70 a barrel in 2005, amid tensions in oil-producing countries such as Iran, Nigeria and Saudi Arabia. Production was also hit by a particularly bad hurricane season in the Gulf of Mexico.
But with motorists very sensitive to increases in the price of petrol, as seen during the fuel protests of 2000 and 2005, prices have been kept down.
At the time of its third quarter results, BP said profits from petrol sales were hit by its decision not to pass on the higher cost of oil to motorists.
And Mr Vandervell said profits made by companies from their forecourts were “absolutely tiny” – a point underlined by the closure of 600 independent petrol stations in the UK last year.
Ms Bridger said: “Supermarkets now control 10% of petrol stations but sell 30% of fuel. Supermarkets drive the price of petrol down because of the huge bulk they buy in.”
Oil companies’ profits come from their “upstream” businesses – getting oil and gas out of the ground.
