The Most Profitable Company in the UK – Shell

But, do they deserve it?

Last year, Shell made profits of $27.6bn (£14bn). This equates to profits of about £1.5 million per hour – which by any stretch of the imagination is not a bad hourly earning.

The profits have been criticised by trades unions, environmentalists and motoring organisations.

Motoring organisations claim that petrol is too expensive and it is unfair companies make such profit at the expense of the motorist. Personally, I think petrol should be expensive (for environmental reasons). But, also, Shell make the majority of their profits in the production of upstream oil, not at the petrol pump. The profit margin on the retail price of petrol is quite low; most of the cost of petrol is tax to the government.

Environmentalists argue it is wrong to make the profit from a process which is contributing to environmental problems. It is argued a windfall tax should be levied on  the profits of Shell; this money could be used to combat the effects of global warming.

Jeroen van der Veer, Shell’s chief executive replied to these criticisms by arguing:

“A windfall tax against the oil industry called for by the unions and the environment group Friends of the Earth would be counter-productive: “Any additional tax – if significant – [means] we can invest less and over time it will impact on our production,”

Should Companies be Taxed More?

Yes

1. They operate in an oligopoly, most of Shell’s profit comes from having monopoly power in the production of oil
2. They don’t need £14 billion a year for investment. Majority of profit goes to shareholders

No

1. Profit is a reward for the nature of the business.
2. They can use profits to develop alternatives to petrol (although whether they are serious in this is a good question)
3. Shell already pay corporation tax

What do you think? Should the Government place a windfall tax on Shell ?

Oil price predictions 2008 

Top 10 British Companies