Are the profits posted by oil companies excessive? Should they be taxed up to the hilt, so that Joe Public can see some return on the exorbitant prices paid for petrol?

It’s perhaps not surprising. After all, with oil up there in the $70s, Exxon Mobil has just posted second quarter net income of $10.4 billion. That’s the second highest level ever achieved by an American company. The highest ever level of net income was $10.7b, set six months ago by, yes you guessed it, Exxon Mobil.

Royal Dutch Shell did not do so bad either, it’s net income came in at $7.32bn, a whisker ahead of BP’s $7.27.

There has been talk of late that BP is looking to merge with the Dutch-Anglo oil company. But, yesterday, Shell’s boss van der Veer ‘no commented’ all question posed by the press on that subject.

In fact it’s not all roses at Shell. While profits are impressive, the company was forced to make a $1/2 billion provision for legal action relating to the overstatement in oil reserves.

With these massive profits, there is no doubt that calls for a windfall tax will grow. Equally, it could be argued that right now with energy costs rising so fast, the oil giants need profits to fund investment into further oil exploration, and into exploiting other forms of energy.

BP’s Lord Browne recently said he believed there was more oil lurking in the oil sands of Canada than has yet been found throughout the world, ever. But extracting oil from these sources is very expensive, and requires massive initial investment.

With China’s and India’s thirst for oil and other forms of energy growing so fast, the global economy needs more finds, and alternatives to oil. A windfall tax could do little more than penalise us all, in the years ahead. It is clear to us that with record profits, oil firms are likely to be able to make record investment; perhaps the best thing for Joe Public is to let the experts in energy make their decisions without interference, in the hope that Browne and van der Veer use the money to progress the inevitable conversion to renewables. Oil is too useful to burn.

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© Investment & Business News 2013