Thursday, 5 August 2010

Oil Companies, Profits and BBC Bias

As some of you may know, I've been popping up on various radio programs talking about Oil Companines. Yesterday, a researcher BBC 3 Counties Radio called me up and asked me in the light of the recent profits from Shell, and the underlying profit of BP, why weren't we seeing lower prices at the pumps from "the falling cost of oil".


My reply was that the oil price hadn't fallen, it had risen from $72 to $82 in the last 6 weeks or so. Secondly, this is priced in dollars. Some of this recent rise has been offset by a rise in Sterling from $1.42 to $1.52, which is why pump prices had remained broadly stable. Oil had, in fact been rising steadily since 2009. The last time petrol was below £1 per litre, Sterling was buying $1.65 and the oil price was $52. Indeed, the rise in Sterling since the budget probably represents a tax-cut sufficient to offset the future rise in VAT. Indeed that alone demonstrates the foolishness of "Keynsian" stimulus as followed by President Obama, and why Coalition style cuts would lead to a richer country.

Furthermore, I said, trying to blame the oil companies for the price of petrol was like blaming farmers for the price of bread. The cheapest petrol around will be sold more or less at cost. The profit being made in the shop, which is why, if you do see 'pay at pump' machines, they're always disabled. Of the £1.129 per litre of the cheapest petrol 57.19p is fuel duty, 10.01p is VAT on that duty, 6.8p is the VAT on the fuel, and just 38.8p or 34% is the cost of the fuel.


That 38.8p pays for the exploration, drilling, extraction, transport, refining, delivery and storage of that fuel. There may be a penny or so profit for BP or shell, but probably not at the cheapest petrol stations. The lion's share of the £70 from a typical tank of petrol goes to the Government, which means that more is probably spent on out-of-work benefits by the Government from your tank of petrol than goes to BP or Shell, indeed more is probably spent on national defence out of your tank of petrol than goes to their profit.

"Ohh, I hadn't realised that". They had clearly wanted an analyst to confirm their prejudice against business and the profit motive. The same questions are asked every time these public companies release numbers. The same answers are given: that excess profit will be competed away, and that margins are very, very low.That there is no conspiracy against the public.

This is bias. It is not a party political bias, but a cultural and econmic one, which betrays a leaning to discredited economic theories which are supported by the party membership of the Labour party: that 'profit' is distorting. That 'profit' discracts from the business of delivering service to customers, and that the Shareholder interest should be secondary to that of the customer. That 'profit' represents the difference between what you do, and what you should, pay.

Of course this is not the case. Look at the queues outside the cheapest petrol station in your local area: people will save a pound or two per tank and be prepared to wait for 10 minutes to do so. It pays the company to offer petrol at cost, and scalp whatever profit it can from the overpriced sweets and chocolate (and on valentine's day, mother's day and your wife's birthday, flowers) you buy in the shop. There is no conspiracy against the public, there is brutal competition for business, and in the petrol business, that means cutting costs and delivering your petrol cheaper than Q8, Texaco, Esso, or the supermarket.

But the BBC didn't want to hear that. So they 'ran out of time' for my slot. Oh well.



12 comments:

Mr Eugenides said...

Tremendous post.

Henry Crun said...

Brilliant post, Jackart.

I can just imagine the BBC producer frantically doing that hand waving in front of the throat "cut" gesture during the interview.

North Briton 45 said...

Sorry, but you are simply reading far too much into this. I could have relayed most of the facts you produce succinctly in your blogpost; you just had the misfortune to have been contacted by an idiot producer who didn't know his or her facts.

Such an occurrence would not have happened had Evan Davis, or Robert Peston been involved.

As for the supposed bias, every morning characters such as David Buik, Howard Wheeldon, Brian Coulton et al are wheeled on to Today and BBC news business segments; hardly raving pinkos.

Jackart said...

I'm sorry, mate, but Peston's a know-nothing "keynes"* and Obama worshipper, who's responsible for those same, dull, thoughtless, know-nothing questions about profits and director's remuneration.

Every morning, I shout at my radio.

The BBC is a left-wing organisation that tries to be impartial, but because it doesn't and cannot, 'get' the philosophy underpinning the arguments of the other side, sometimes strays into outright shilling for the Labour party.

It tries, and fails to be impartial.

*as in the keynes that exists in the fevered immagination of state-spending fetishists everywhere, not the subtle and interesting economist who thought state spending at 30% of GDP would be "insanity".

North Briton 45 said...

Paranoid nonsense. A blathering incoherent, argument, fuelled by dogma.

I shout and argue with the news all the time; it's perfectly normal. I would be upset to learn that you didn't argue with the news.

You might not like Peston, but that hardly validates your argument. Evan Davis often comes across as taking your line on such an argument, but still strives for impartiality.

And again, every morning David Buik is on the TV or Today, or Howard Wheeldon. Buik emails me each day and cannot possibly be described as left wing.

And Brian Coulton was on this morning taking about inflation.

No news programme can ever be 100% objective; simply impossible. But no broadcaster does a better job than the BBC. Sky is laughable biased, ITV a comic, Channel 4 too left wing, Five....... I don't know what to say about Five.

Umbongo said...

Jackart

I'm not surprised that they didn't have the time for your contribution although the usual excuse is "technical difficulties" with that pesky new invention - the telephone.

I disagree with your statement that the BBC " . . tries, and fails to be impartial". On the contrary, it doesn't even try. Listen/view any report or discussion on, for instance, climate change, banks, immigration, prisons, islamic terrorism, Obama etc and the BBC "line" is instantly identifiable and consistently pushed: the partiality just shines through.

Demetrius said...

If the BBC cannot take on the idea that the petrol market has bcome more complex and uncertain with the added variation in prices this is very worrying. Or do they all walk to work?

Robert Edwards said...

Very good posting - I'm not surprised that your slot was cut, as the BBC only seem to understand their own 'business model' - vast unearned income generated by license, which is then used to justify itself in perpetuity by hijacking new media and conveniently forgetting to make watchable programmes.

They think they're Google!

kavak yelleri 125. bölüm izle said...

thank you

Anonymous said...

"if you do see 'pay at pump' machines, they're always disabled"

Eh?

They are not disabled, I use them quite a lot.

Are the rest of your facts as good as this?

Jackart said...

I've only seen pay at pump machines in action on the motorway, where a captive audience means more expensive fuel, typically 5p more per litre, meaning actual profit on the fuel, and in the supermarket, where petrol is a loss-leader for the big destination shop.

I've never seen a pay at pump machine in action at any other sort of service station, and I've seen many disabled, especially where the fuel is cheap.

Yes. My facts are good, annonywanker.

The Fatch said...

Asda in Luton has Pay at pump machines which tend to be on. Unfortunately they are in Luton and you are already in the Supermarket car park.

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