BP chief economist expects oil companies’ profits to decline in 2008 on costs

FRANKFURT (Thomson Financial) – BP’s chief economist Christof Ruehl said he expects oil companies’ profits to decline next year from this year as costs balloon, according to Financial Times Deutschland.

Some 90 pct of crude oil and gas resources are currently in the hands of state-owned companies such as Saudi Aramco, it said.


‘When oil prices are high, it is relatively easy for state-owned companies to work profitably,’ Ruehl told the newspaper in an interview, adding these companies then have no interest in sharing the burden of oil production with the private sector.

‘In the current environment it is difficult to replace production with new reserves,’ Ruehl said.

Companies such as BP are forced to spend money to find new reserves, for instance in the deep waters of the Gulf of Mexico, off the coasts of western Africa or Brazil, or in the permanently frozen ground of Alaska and Siberia.

There are ’surely no more’ easily accessible resources such as in the Middle East, Ruehl said.

In the meantime, demand from India and China continues to rise, pushing up oil prices.

Thomson Financial