21/09/2000 18:05 - (SA) Big Oil catches fuel fallout William Maclean

London - Oil majors are in the dock as politicians in the West scramble to divert consumer anger over fuel taxes onto an industry seen as dirty and unfashionable.

But Big Oil is reluctant to fight back, and for good reason.

In Europe, companies are anxious not to antagonise taxmen looking longingly at their record profits.

And elsewhere in the world, majors will not risk goading governments who hold the keys to future energy projects, analysts say.

"We're keeping our heads down," said an executive at one of the world's biggest companies.

"If we get criticised, so be it."

And a robust response to their critics might not sit well with some companies' ambitious efforts to tout themselves as benign forces for environmental progress, analysts add.

"The companies won't want to ruffle any feathers," said JJ Traynor, an analyst at Deutsche Bank.

"The largest four oil majors' long-term growth plans are in big integrated energy projects in gas that involve working with governments."

He referred to US ExxonMobil, Anglo-Dutch Royal Dutch/Shell, and Britain's BP, who earned more net profit in first half 2000 than the world's top three corporations combined, and to France's TotalFinaElf.

GORE BLASTS OIL COMPANIES

The majors, long a target of human rights and environmental groups, have had more than their usual share of flack of late.

In the United States, Democratic presidential nominee Al Gore blasted the oil industry for alleged profiteering while ordinary motorists paid rocketing prices at the gasoline pump.

In Germany, German Chancellor Gerhard Schroeder accused oil companies of price fixing and called for an anti-trust probe.

"I can smell agreements being made," Schroeder said, prompting Shell to call for government-industry talks.

And in Britain, the companies were accused by officials this month of doing too little too late to break a blockade of refineries by truck drivers angry at high fuel taxes.

The companies swiftly denied dark accusations of collusion with the protesters.

But commentators continued to label them fat cats due to profits swelled by Opec-driven oil price gains.

The companies' riches offer a tempting target to any British government seeking to offset any cuts in retail fuel tax.

Firms have long feared a windfall raid similar to the #5.2bn ($7.3bn) tax imposed in 1997 on privatised utilities.

Some UK executives also worry the government may widen the tax net over work in the North Sea, where producers from around the world enjoy some of the most generous tax terms anywhere.

In their defence, companies could point out that price rises are already bolstering European treasuries through heavy energy taxes imposed to deter car use and protect the environment.

Also, they make very little money selling petrol to Europe's motorists.

But it would take a brave oil executive to make those points on prime time television in Europe's heated political climate.

In the United States, oil executives have complained about environmental regulations they say make it too difficult to build new refineries, electricity plants or fuel storage tanks.

But analysts say any move to relax environmental rules would meet opposition from many Democrats and green groups.

And while oil majors have played no direct role in oil's relentless rise, experts say curbs on investment imposed by the majors to meet capital discipline targets has limited the world's cushion of spare supply.

The companies' reticence is in contrast to the stance of another of the West's energy bogeymen, the Opec export cartel.

The Saudi-dominated Organisation of the Petroleum Exporting Countries has reacted to the outrage over high prices by stepping up a long campaign against high fuel taxes in Europe.

OPEC'S VENEZUELA SAYS PRICE IS FAIR

It points out that European states earn more from a barrel of Opec oil, via taxation, than Opec countries do themselves.

And its message seems finally to be getting through to European consumers fed up at high petrol and diesel costs.

"For us prices are fair, not high," said Venezuelan President Hugo Chavez, one of Opec's leading price hawks.

But Opec is a collection of sovereign governments.

Publicly-quoted oil companies, powerful as they are, are dependent on agreements with host governments for permission to explore and produce oil and gas on their land, analysts say.

They face a climate of public and shareholder opinion increasingly disenchanted by corporate power. That is a truth acknowledged even by the industry's most aggressive corporate operator, BP chief executive John Browne.

"Companies working on a global basis have to tread with care and sensitivity," he told a conference in Canada in June.

"The industry has begun to benefit over the last few years from the acceptance that we are simply one part of society, that we cannot dictate terms or pretend to be greater than government."

http://news.24.com/News24/Finance/0,1466,2-8_915265,00.html

-- Martin Thompson (mthom1927@aol.com), September 22, 2000