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Mmmm...and Shell withdrew from the London Array wind farm project because of cost...

I think it's time a little timely pressure was put on Shell.

This is apples and pears and poor commentray to boot. So, the impaired morgage number is £5bn - out of what total? company loan losses are £469m - what's the total asset portfolio? And if people live in their houses, they rarely spend time worrying about the loan/equity ratio - their interest rate yes, their capital position, no.
And, #1 , Shell's job is to make profits for shareholders (including all the pensioners and their pension funds around the UK) - the wind farm project is not profitable without huge government (=taxpayer) subsidy and is pretty useless when the wind doesn't blow. Plus, of course, Shell pay huge amounts of taxes (direct and indirect) and make profits outside the UK.

Obviously an old news day. Oil prices high so oil companies make some more profit and the government gets some more tax. Reduced lending results in lower bank profits (and govt getting less tax) and financial squeeze results in some of the less financially robust defaulting.

Oh and a big company makes big profits. Must be something to do with relativity.

I really must study more.

I'm intrigued by the amount of Corporate write downs you have at £469m.

They have been covering up huge losses at BoS Corporate, you only have to look at CJS going down owing them £113m in September 2007 to know £469m is still way under the actual amount - there has got to be more than 4 companies with losses more than this and I know about 40 which went bust between April and December last year and just 6 added up to more than £300million.

Trouble is, the way this Bank misrepresents to the shareholders and the press, the credit crunch is likely to go on for a very long time.

Ask pertinent and relevant questions and you may get the truth - but I doubt it.

Robert, if you are going to bring these two events into the same article, why don't you dig a little and draw the obvious connection between the two seemingly unconnected stories?

Perhaps because admitting the record oil prices and profits at Shell may have something to do with the record growth in money supply (The G7 Governments debasing their currencies to reinflate the housing market and bail out the banks) is a little politically unpalatable? Especially when it is the poor and lower middle class who bear the brunt of this bailout in higher energy and food costs..

Or then again, you could just say nothing at all, and leave the article insinuating inflation is all the greedy oil company's fault?

Profit figures are useless without the turnover they are based on. Has HBOS produced a good ROCE - impossible without the turnover. Would the shareholders money be better off in a savings account - impossible without the turnover. IS shell profiteering - impossible without the turnover. These are big companies and some idea of actual size is essential to put them in context - or are you just after cheap headlines no-one can check?

"What a contrast with the fortunes of our energy and commodity companies, which are generating eye-watering volumes of cash from the rise in prices that is putting so much upward pressure on inflation and downward pressure on our economic growth prospects."

Robert, I think we may find that these "eye waterering volumes will be quickly diluted by inflation

Therefore, away from todays headlines they and we are all going to be in the same boat where a pound is worth 80p and so on.

Thats why this insistance of trying to soften the blow by holding rates or lowering them is going to be so much more damaging than holing the boat and building a new ship.

Increase rates now

I don't think making comparisons between such companies is useful, and as ever there is little mention of the benefits to us all in taxes from profitable companies like Shell.

In that light, and probably most important for all of us is the difference between the billions in taxes Shell WILL pay and the millions that HBOS and many other companies WILL NOT pay due to less profits combined with writedowns over the next year or so. This will be the most crucial nail in UK plc finances coffin.

Without (or even with) massive government spending cuts the difference will have to be made up by Joe Public through higher taxes and increased prices.

Perhaps the comparision should have been with HBOS and Centrica, then we could all be angry with Centrica for making all that nasty profit and then be happy and cheer for HBOS who lost all their money and now have very little to lend out for new mortgages? What do people want, sucesseful UK companies or a complete takeover by European conglomerates then we can blame all our problems 'those foreigners'!

Bit simplistic this - lets not forget the current commodity bubble is a consequence of investors fleeing currencies, most notably the dollar, for tangible assets.

Some of the fleeing is rational - oil and rare earths are much needed commodities - and some irrational - gold isn't as needed, but nonetheless well regarded for its rarity.

For those of us sympathetic towards something like a gold standard - or equivalent - over fiat economics, this is something of a non-surprise.

In times of uncertainty, markets move towards tangibles or desirables controlled primarily by demand/supply over phantom items controlled by politicians.

Perhaps some form of two-tier economy is awaiting to be found, allowing a gold standard and a fiat system to operate together in order to use their advantages whilst mitigating their disadvantages.

Such a comparison between the two is fine with me as it should help the average person understand the state that the markets are in at the moment, highlighting how greedy and shortsighted the banking system has been.
Robert Preston isn't writing for the FT, his blogs have to be understandable to all, if you want in depth dissection then there are plenty of other sites to read.

Plus, whilst the whole tax thing is rather complex, I was under the impression that Royal Dutch Shell was tax resident in the Netherlands and not the UK, it

People make these observations and comparisons but fail to draw any of the correct conclusions as to why financial institutions are collapsing and oil companies (particularly oil producers and service companies) are doing well.

If you'd studied geology as well as economics then you'd understand that the *rate* at which the world can produce oil is limited (and at the moment the nice easy to access oil is certainly limited). Our economists (more philosophers than scientists) assume a model of some level of growth forever - which is a little odd considering we live on a finite sphere with limited resources. Leverage/debt is provided on the assumption that the economy will always grow in the long term, but this is based on there being no finite ceiling on never-ending growth. The growth has stopped/reversed, making the deleveraging process necessary and it is painful. Why has the growth stopped/reversed? Well there are no "greater fools" left to sell our over inflated houses too, businesses are struggling with the increase in energy prices and we all need to tighten our belts as the price of energy increases. Why is the price of energy increasing? Geological facts. Read up on Hubbert's peak oil theory, easy to search for on the internet.

We live on a finite planet, and rather than moaning about oil companies making decent returns, we should be applauding them and investing in them to provide the energy we all need for our daily lives. Moreover, if we are unhappy about the high price of energy we simply need to consume less! As the rate of oil production enters a permanent decline during the second half of our petroleum age, we need to get used to *conserving*, not consuming. The first place to lay any blame is on ourselves for our untamed consumerism.

Windfall taxing energy companies would therefore be pure folly at a time where the sector needs investment. And consumers simply need to reign in.. our resources are finite, there is competition for them and if we want to consume, we have to pay.

I have to agree with some of the points made by AvensisTom.

I don't advocate the huge profits made by Shell and the other energy suppliers, however I also do not feel they should be raised now - simply because the price at the pumps / in the meter has gone up.

My angst with the energy suppliers is that they have known their resources are finite, but have never invested heavily in expanding infinite (or near to) resources - like solar / wind power. If they hadn't been buying up electric cars in the 80's - to shelve them - we would have such a crisis now. Most of the wind farms are unprofitable now, because we didn't do the research years ago.
However if you understand the market, supply and demand is always based on a finite resource - infinite resources cannot have a price, and therefore no profit can be made.

For me, I think both the energy and fuel prices need to rise a lot, lot higher. I will give you 2 good examples why.

1) On breakfast TV this morning they had a piece on saving energy. They went to family house, where to my amazement, the house had all the lights on and 2 large TV's running. I don't know if this was staged by the ´óÏó´«Ã½ - but surely they are not being hit anywhere near hard enough.

2) Whilst visiting family last weekend, I noticed in my brothers close that several of his neighbours are driving to the local shop - less than 3 minutes walk away! It takes longer to start the car and drive than it does to walk! Again, prices are no where near high enough.

Face facts - this country has become lazy and wasteful. My grandmother (who lived through the war) always taught us to be prudent, turning off lights and other energy saving. It seems a generation of dullards has bred another - none of which understand how to save energy. However one thing that seems to have been handed down is the ability to moan about everything, and to blame anyone but yourself for your problems.

The best is the way everyone seem to blame the government all the time. It's not the governments fault it's citizens are idiots! (unless you can tie it to lack of education spending) - my god people, what's wrong with you all?

It's funny how nobody wants the nanny state - but still act like helpless children.

I can't wait until we fall out with the Russians over Litvinenko and they cut us off completely. Coupled with a nosedive into recession and perhaps Great Britain will start to realise they have to change their bad habits. It seems nothing else will make the people see sense - we're not even talking about dramatic changes, just going back to the things our parents and grandparents taught us.

I am led to believe that the human race is set apart from the other animals by - not opposable digits - but by the ability to communicate down through the generations. Have we lost this ability already?

I despair sometimes.

The results reflect what is happening at the moment: people need fuel but don't need debt.

The demand for road fuel is inelastic and so people will pay because they need it. Now that Shell has some spare boodle they can invest in exploration and new refineries; just the sort of added value they have not been able to do when fuel prices were cheap.

It is a bit disingenuous including the Nationwide report that this is the worst drop in house prices ever. They have only kept these statistics since 1991 which was in the middle of the last great price fall.

It is refreshing to see that reality is returning to the British economy. However uncomfortable reality might be it is a whole lot better than the fantasy that prevailed between 2003 and 2007.

Shell of course is mostly owned by ..........
our Pension Funds !

Just thought I would remind everybody.

Oh dear, not enough Capital Letters !

The decline in profits at HBOS and Lloyds TSB is not worrying if they're adequately capitalised with a reasonable business mix and adequate risk management, which is certainly the case. The story on these banks' results is exactly the opposite of your analysis - bad times being managed OK. Keep the doom and gloom for when it's deserved. You've overdone it here.

Robert, you say what a contrast in their fortunes...surely you mean what a contrast in the talents and foresight of their directors.
One lot are surely brilliant, the other lot surely hopeless.
Its not difficult to work out which is which.

People go on about Windfall Taxes.

Now bearing in mind that Shell is Anglo Dutch, any windfall Tax would have to be fairly shared with the Dutch Government.

Likewise EDF (French owned).

People are right to be angry, but if the supplies of Gas and Oil are limited and declining, whilst the demand is growing, then the problem will get worse.

It is funny how many Free Market advocates (towards Banks) wish to intervene against the Market with Shell.

But some people will say anything to cause trouble !

Will there be an investigation into the reporting of Company News by Journalists during the Share price volatility ?

What better way to manipulate the market than a well placed speculative News item!

Perhaps people should look see if any 'journo's' have had payments from Hedge Funds etc.

Personally, I am confident all Journalists would survive such scrutiny with no ill efects.

They are purer than the driven snow, of course!

LOL (thats what folks say isn't it?)

I honestly don't know why respected journalists even bother to quote average house price figures from "The Nationwide" - that information is hardly worth the paper its written on.

By all account this is the current state of play:-

Top Mortgage Lenders
1) The Abbey 25% (Plus Alliance at 4%)
2) Lloyds TSB 25%
3) The Halifax (possibly 3rd) who knows what their market share has slumped to, maybe 15%.
4) The Nationwide probably down to 6%.

a) 25% of houses are sold for cash the total mortgage market is therefore 75%.
b) 33% only of 'normal monthly sales' are currently being transacted.
c) of the 'normal sales' currently there is a disproportionately high number of forced sellers.
d) The Nationwide have no idea what the UK average house price is, only their average mortgage offer - that is what they are reporting; nothing else.

Taking all this into account with 33,000 mortgages last month "The Nationwide" probably accounted for less than a couple of thousand mortgages, on houses that have a much higher level of 'distress' therefore lower prices.

The Nationwide (according to their web-site) claim to have 900 retail outlets, on that basis each retail outlet did 2 mortgages last month!

And you call that an accurate survey of the UK housing market? Doubt it.

With the exception of the Ft dot com, little mention has been made in the Financial Press about the Net Asset Value per Share of the British Banks.

It would be interesting to hear from the Banks what their Equity positions actualy are.

When they say, Profits are down or up, how much actual Shareholder Equity is there?

I feel we are all being left guessing, which doesn't help when trying to convince people to support Rights Issues.

Of course some things are more tricky to value, but Accountants can value those things on an accepted basis.

This may sound unnecessary, but I feel honest reporting of this would boost Market confidence and help reduce volatility, prices could settle down to a more accurate level (whatever that may be).

Perhaps I am being too optimistic!

Re: #11 Soupdragon55

Such a comparison between the two is fine with me as it should help the average person understand the state that the markets are in at the moment, highlighting how greedy and shortsighted the banking system has been.
Robert Preston isn't writing for the FT, his blogs have to be understandable to all, if you want in depth dissection then there are plenty of other sites to read.


Absolutely! Dumb down those articles, and be quick about it!

(Patronising? They couldn't even spell the word, eh?)



Re: #12 AvensisTom

Here, here!



Re: #13 TheresOnly1Soupey

Even more here, here!

Worth mentioning that Shell is no longer a UK company.

It is headquartered and run from The Hague.

Therefore comparing a Dutch multinational with operations around the world with UK banks I don't believe is a sensible or appropriate thing to do.

robert,
the question of whether the government should tax energy profits in order to provide funds for the poor to be able to pay their bills seems to be an open and shut case.

but how to acheive it.

energy companies need funds to invest in much needed new infrastructure because they forgot to previously.

government need tax revenue to help the low paid because they forgot to raise the minimum wage above the poverty level.

lve got it, "stop forgetting to spend money were it is most needed"