Shell is beached in the past

IN THE context of Shell's enormous profits of £4.7bn over the first six months, the penalties of £83m imposed on the company by regulators over the oil reserves scandal is petty cash.

Indeed, the £17m fine by the City regulator may be the biggest ever exacted by the Financial Services Authority, but it is unlikely to discourage other big firms from lying about their accounts if they find themselves in a temporary hole.

Shell would like us to think that this is the end of the reserves affair so that it can return to its old smug self.

But it cannot. Investigations by the Dutch watchdog AFM, the US Justice Department and Euronext continue despite the settlement with the Securities and Exchange Commission and the FSA.

Shell executives, including former chairman Sir Philip Watts, sitting comfortably on his £1m payoff, still face potential criminal charges in the US, together with some nasty-looking class action suits from angry investors in the US.

What the affair does show is that there are deep-seated problems at Shell that go far beyond fiddling the numbers to make the reserves look better than they were.

The dysfunctional structure of the company, with dual board system in Britain and the Netherlands, continues and a plan to end it will not be in place until November.

One might ask why it is taking so long, given that multi-billion pound takeovers can be completed in a matter of weeks. Perhaps it points to a management still reluctant to change despite all that has gone before.

It is not just regulatory issues that are overshadowing Shell and its anxiety to make itself look better than it was.

Beneath all the froth about how brilliantly the company is doing downstream - this essentially means it is making a lot of money from higher oil prices - exploration and production look dire.

In the second quarter, production fell 5% and no improvement is expected until 2007 at least. BP, having dared to make deals with the devil with Russia - the world's second-largest oil-producing nation - is reaping the rewards.

The group is engaged in a tricky search for new resources, although one supposes it could buy into Yukos on the cheap if the company had the courage of its founders.

Shell is too big for half a dozen Philip Greens to even think about taking over. But there is little conviction in the market that the present team of Jeroen van der Veer and Malcolm Brinded is confident enough to deliver on a bold new strategy.

Investors should press for more changes.

Debt burden

CHARLIE Bean, the Bank of England's chief economist, may be the only person in the country to believe that fears about the household debt burden have been overblown.

As widely predicted, it finally moved above the £1 trillion mark last month, for the first time ever, after an £11.3bn bounce in lending. Consumer credit continues to surge, climbing to £2.1bn in July from £1.6bn in the previous month although mortgage lending levelled off at £9.2bn.

Nevertheless, the long-predicted pause in house prices is refusing to come through. The Nationwide index jumped 2.1% in July, keeping the annual rate moving ahead at a dangerous 20.3%, its fastest pace since May 2003. If it looks like a housing bubble and smells like a housing bubble it is not quite clear why the authorities like to pretend it is not.

The National Institute for Economic and Social Research thinks there is something nasty happening. Its work suggests that house prices are now 30% higher than is justified. It also believes that the Bank's 'steady as you go' policy of raising rates by a quarter point at a time is doing no more than postponingthe day of judgment and it might as well go the whole hog and raise rates to 5%.

It is Bean rather than the NIESR's Martin Weale who has the vote on the Monetary Policy Committee. But given the buoyancy of the numbers, I would be inclined to go with the astringent Weale.

Marking time

SO it looks as if Paul Myners will remain as chairman of Marks & Spencer until early next year at least. This makes short-term sense in that Myners led the board which produced M&S's new strategy and is the right person to see through the critical financial restructuring at the group. It will also give headhunters the time to come up with the best candidate to head Britain's favourite retailer.

But as chairman, Myners needs to get back in touch with his gentler side. This means reaching out to those scorched in the heat of battle - the dissident big investors, City advisers and even Philip Green.