Britain’s top oil man, John Browne, warned on Tuesday that fear was driving the price of crude to artificially high levels, with untold consequences for the global economy.
The BP chief executive said turbulence in Iran, Iraq and Nigeria was leading to continual speculation about oil shortages and there were ”all sorts of things that suggest it is getting worse”.
Higher oil prices helped BP produce underlying profits of $5,3-billion in the first quarter — up 7% — on sales of $67-billion, but Browne said global supply and demand for oil was moving towards balance.
”I was at Doha at the weekend. Most [energy] people are not happy that the price of oil is so high because it is so unexpected and no one is quite clear what the impact will be,” he said.
Other BP executives hinted that hedge funds and other speculators were partly responsible for the current record levels of $73 a barrel.
Vivienne Cox, vice-president of supply and trading, said there had been a massive increase in the number of financial institutions trading in the oil markets. ”Commodities have become a class of investment, which was not the case five years ago,” she said.
The oil company privately fears that unusual periods of very high crude prices and huge profits will spark a public backlash and encourage politicians to slap on more taxes.
Tony Woodley, general secretary of the United Kingdom’s T&G union, led the attacks this week, saying BP should be made to cut fuel prices.
Browne pointed out that BP’s taxes had already risen this year to 35% and would rise to 39% as a new North Sea tax came into force after being announced last year. But he was quick to point out that shareholders would also benefit from BP’s strong performance.
The company also came under fire from environmentalists for not spending enough on safety. — Â