Low oil prices halve BP’s profits

February 19, 2010 at 3:53 pm

BP has released details of its annual profit for the last year, but the picture is bleak. In 2009 BP only managed to achieve a profit of $14.4 billion. Although this may seem large, it pales in comparison to the previous year’s profit of $25.6 billion – a fall of 45%. It is the lowest annual profit that BP has reported since 2003.

The main reason for the poor profit margins is the fall in the global price of crude oil over the course of the year. When the July 2008 price of $147 a barrel is compared to the January 2009 price of $40, it is easy to see why the company has suffered so badly.

It was clear that such disastrous results were going to hit BP’s shares hard, and indeed they fell 4% on the news, dropping 22.6p at the close to 572p. The results were worse than had been expected, so this was hardly surprising.

The amount of profit per barrel also clearly displays why BP has been hit so hard. In the last quarter of 2009, BP said that it was only making $1.49 profit on each barrel of oil that it refined. This is compared to $5.20 profit on each barrel the previous year.

Despite the huge fall in profits, there was some good news. The oil and gas production for the company went up by over 4% in 2009, which is higher than its long-term target to increase production by between 1% and 2% every year. However, despite this rise, BP confirmed that it is expecting to produce less oil and gas in 2010.

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