Row over oil profits reignites

BP reignited the row over oil company profits today by revealing that it made almost £9 billion last year, an increase of 26 per cent.

The profits, which almost matched the figure announced last week by Shell, mean that Europe's two biggest oil firms will have made around £18 billion between them last year.

The companies have benefited hugely from fluctuating oil prices, leading to charges that their profits are "obscene" and should be subject to a windfall tax.

BP said its profit for the year was $16.2 billion, or £8.7 billion.

If one-off accounting items are included, the underlying profits were $17.335 billion, or about £9.3 billion.

The figures - which were below the expectations of some City analysts - will enrage motorists and consumer groups, particularly as one of the biggest increase in profits came from the refining and marketing division, which includes the company's huge portfolio of petrol stations.

Today, BP's chief executive Lord Browne said: "Against the backdrop of strong oil demand we have had a very successful year both operationally and financially.

"Our strong cash flow is now reflecting the results of our significant investment programme over the past few years and improvements in underlying performance in line with strategy."

The refining and marketing division made a profit of $5.6 billion (£ 3.1billion), a rise of 80 per cent.

The company admitted that it had been able to boost its profit margins in petrol retailing because oil prices had fallen during the final quarter of the year. Lord Browne said oil prices peaked at $52 per barrel in the second half of October after Hurricane Ivan disrupted supply in the Gulf.

He said they would remain at " historically high levels" this year because of concerns about the security of supply and a decision by the Opec countries to reduce their production.

The furore over the profits will be intensified next month when the company's boardroom remuneration is revealed in its report and accounts.

These are expected to show that Lord Browne was paid as much as £5million last year, as his package was boosted by bonuses triggered by the company's booming profits.

The company also announced a " significant one-time step-change" in the level of dividend payments it planned to make to shareholders.

Citing the "strong prevailing circumstances of the group", Lord Browne said the company would lift its fourth quarter dividend in dollar terms by 26 per cent - the biggest single increase in recent history. BP's results are expected to be followed by a further rash of bumper profits from other major British firms over the coming few weeks.

On Thursday Barclays is expected to announce that it was more than £4.5 billion in the black last year. Record profits are also expected from HSBC, Vodafone and Tesco.

The recovery in British company profits has helped push the FTSE 100 Index back up towards 5000, a level it has not exceeded since the summer of 2002.