BP and Royal Dutch Shell have reported massive increases in profits for the first three months of this year on the back of rocketing petrol prices, which are expected to hit £5 a gallon today. BP's pre-tax profits rose 48 per cent in the first quarter to $6.6 billion (£3.3 billion) while Shell increased its profits 12 per cent to a record $7.8 billion (£3.9 billion). The increase has been driven by the rising oil prices, which the companies have passed on to consumers in the form of higher petrol and diesel costs. The price of oil came close to $120 yesterday but was trading slightly lower at $118 in early trading today. Meanwhile, the price of petrol continues to rise because of supply concerns in Scotland - where the Grangemouth refinery was shut down for two days because of industrial action. Workers have now returned to Grangemouth but it will take about three weeks to get the refinery, which produces 10 per cent of the UK's petrol, up to full capacity again. The Automobile Association said that petrol prices had hit a national average of £1.098, equivalent to £4.99 a gallon. Petrol is expected to pass the £5 mark, possibly as early as today. Shell's earnings of $7.776 billion were ahead of market estimates of $6.772 billion as production rose from 3.509 million to 3.522 million barrels of oil equivalent per day. The company raised its quarterly dividend by 11 percent to $0.40 a share. Jason Kenney, oil analyst at ING, said: “They look like blow-away numbers." Shell's total cash flow was 50 per cent up on the same period last year at $16.9 billion but this was offset by higher capital investment in new production. Jeroen van der Veer, Shell chief executive, said: "Good operating performance, combined with increased oil and gas prices, offset the impact of downstream conditions in the first quarter." BP's first quarter result of $6.6 billion also beat analyst expectations of $5.31 billion but production was flat at 3.913 million barrels of oil a day. The company has started a restructuring programme to simplify management and cut costs to close the profitability gap on its rivals. BP's operations in the North Sea reported a large increase in profitability in the first quarter because of the high price of oil, rising 27 per cent to $923 million. The company's Russian operations also performed well, increasing revenue fourfold. TNK-BP, Russia's third largest producer, contributed income of $744 million to the British company, up from $162 million in the same period last year. BP will pay a dividend 31 per cent higher at 13.5 cents per share in the first quarter.
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