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BP's margin cut 'immoral'

02 May, 2008
Dealers fume as premia charges go up - and so do BP's profits. Linda harrison reports
Page 4 
BP's dealer network has reacted angrily after the oil giant cut fuel margins - and announced record profits in the same week. BP contacted dealers on March 31 to say it was increasing its grade premia charges on fuel. It listed many factors for the rise, implemented on May 1, including rising prices for crude oil and utilities and the recent Grangemouth strike. It added:
"Current market dynamics have reluctantly left BP with no option other than to introduce these increases in premia."Among those affected was Paul Sykes of Shaws Petroleum, who said it meant up to a 0.15ppl rise for his Huddersfield-based business, or a cost of £10,000 per site per year. Sykes, who has five sites, said: "If we were coming to the end of our BP contract we would leave, but we're tied in for another two and a half years. Retailers are up in arms about this. For BP to try to squeeze us until the pips squeek when margins are as tight as they've ever been - and BP has just announced record profits - is quite immoral."Sykes said he understood the premium related to fuel additive prices, a fact not mentioned by BP. He added: "I've told them I'll consider going to arbitration over this, but so far I've had no response."Others were looking to leave BP. One retailer who asked not to be named said they had given notice, with time left on their contract, because it no longer made commercial sense to be with BP, adding: "It was stupid for us to sign a contract with this clause in which BP can do what it wants." Sej Sejpal, co-director of Motor Fuel Group, said: "While I can see why BP is doing this, it definitely wasn't handled in the best way."BP, which last week reported Q1 profits of £3.3bn - up 48%, said: "BP regularly reviews its commercial arrangements with all of its customers, including our independent dealer network, in the light of changing market conditions. There was no requirement on BP to debate the issue with its customers as it would be unethical to discuss commercial arrangements in an open forum."