The Observer (UK): Making a mountain out of Shell's profits: “'Money isn't lost or made. It's simply transformed from one perception to another.' Ah, that Gordon Gekko, he hit the nail on the head every time.”: “The slump in reserves - which has been forced on the company by its own over-optimistic assessment of the value of what it had in the ground - means it will have to spend more for years to come, just to stand still.” (ShellNews.net) 6 Feb 05

Frank Kane

Sunday February 6, 2005

'Money isn't lost or made. It's simply transformed from one perception to another.' Ah, that Gordon Gekko, he hit the nail on the head every time. And the hero of the Eighties' classic movie Wall Street - Gekko was the hero, of course, not that wimpy Martin Sheen character - would have had a field day with Shell's profits last week.

When this newspaper revealed that Shell was about to declare the biggest corporate profit in British history - nearly £9.4 billion - it sparked all those wonderful comparisons again. It was the equivalent of £1m per hour, or £295 per second.

Some of the tabloids got very carried away. If you travelled by train from London to Edinburgh, Shell would have earned £5m while you did it, said one. Another told us that Shell's profits, if stacked up in £50 notes, would be 22,000 metres high, more than twice the height of Mount Everest, and weigh more than two blue whales. Who thinks of these calculations?

But Gekko got it right. Shell transformed one perception into another - black carboniferous liquid into paper cash, and then into jobs, lifestyles, assets, dividends and pensions. So we all benefited from Shell's cash-generating abilities, and all those whingeing cries about 'obscene' profit levels were irrelevant.

I want to know at what level the profits cease to be obscene. If Shell had only made, say, £5bn, would it have been merely prurient? If it had just broken even, would it have been chaste? And would it have been virtuous to have gone into losses? If it had made no profits, it would have paid no tax and no dividends, so we'd all have been worse off.

In any case, we won't have to wait too long until we see what Shell would be like with falling profits. The slump in reserves - which has been forced on the company by its own over-optimistic assessment of the value of what it had in the ground - means it will have to spend more for years to come, just to stand still. This will be the last year the tabloids can think up their little wheezes, at least as far as Shell is concerned.

Still, there will always be the banks, which start reporting their gazillions next week. For Barclays, it will work out at say, £150 per second, or a bit higher than Everest.

http://observer.guardian.co.uk/business/story/0,,1406712,00.html