Shell shocked

Please, I beg of you – forgive me for that pun. I am so sorry. So very very sorry.

By way of apology, here is The Morning Star editorial:

The power of oligopoly

(Thursday 31 January 2008)
SHELL and its apologists are wriggling as usual in their attempts to pass off £13.9 billion profits as entirely reasonable.
They deny that it is motorists in Britain who contribute, through previously unseen forecourt petrol prices, to this level of profits, insisting that half of their bonanza comes from extracting the oil, and selling it on the wholesale market.

Maybe it does, but 25 per cent of it comes from refining, distribution and retail, which is a not inconsiderable slice of the cake.

In any case, the oil transnational companies’ ploy of dividing up their operations into the various stages from exploration to the petrol pump is simply a means of obfuscating the obscene level of their profits.

It is similar to the game played by the gas and electricity privateers, which blame the price that they are forced to charge on the upstream costs that they have to bear.

They don’t mention that each company has its own wholesale operation which maximises its profits by charging the ultimate price to the parent company’s subsidiary further down the line.

It’s almost like value added tax, with every single transaction bringing an additional cost.

But, whereas VAT ends up in the exchequer, the ratcheted-up costs of the gas, electricity and oil companies pour a profits stream of flood-like proportions into the pockets of shareholders.

Those who claim that energy markets are highly competitive are living in another world.

These markets are dominated by an oligopoly, into which it is virtually impossible for new companies to break.

Even if they give the impression of challenging each other for contracts, their commanding positions in the marketplace guarantee their continued, very profitable domination.

Nor is it true that Shell and the other oil majors have to have this level of profits to either search for new oil fields or to diversify into renewables.

Shell is, in fact, investing less in exploration than previously and it has retreated from its fine words on renewables of a decade ago to concentrate on environmentally damaging projects such as the exploitation of Canada’s oil sands.

Disregard the cuddly, nice-to-be-with sunshine adverts of the oil transnationals.

They are all as single-minded as ever to control the globe’s scarce hydrocarbon reserves, even if it takes invasions of sovereign states, as in Iraq, and their sole priority is the well-being of shareholders.

As Unite joint general secretary Tony Woodley intimates, that should not be acceptable to the people of this country or to its government.

New Labour has been too soft by half on big business, holding down its share of taxation, slashing corporation tax and refusing to increase income tax on the super-rich who benefit disproportionately from the profits bonanza.

And this at a time when Gordon Brown and his cloned Chancellor Alistair Darling miss no opportunity to impose below-inflation pay settlements on public-service staff and to lecture low-paid workers on the need to rein in their demands.

An immediate windfall tax on Shell’s obscene profits could help to plug the yawning gap in the government’s tax income, but the only long-term solution to this problem is to bring these oligopolies into public ownership.

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