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Brown Seeks Fuel Price Cuts in U.K. After BP Plc Profit Surges

By Kitty Donaldson and Mark Deen

Oct. 28 (Bloomberg) -- Prime Minister Gordon Brown stepped up calls for U.K. energy companies to pass on a drop in oil prices to consumers after BP Plc's surge in third-quarter profit triggered a backlash from unions and Labour lawmakers.

``In the past as the market price has gone up it's been passed on and we want to see that fully reflected in the price of petrol and fuel on the way down,'' Brown told reporters at his office in London today.

BP, Europe's second-largest oil company, said profit rose 83 percent from a year ago to $8.05 billion as crude prices hit a record above $145 a barrel. John McDonnell, a member Parliament from Brown's Labour party, said energy companies should pay a one-time tax to fund help for people struggling to pay home heating bills.

``At a time when many people are struggling to cope with high fuel costs just to keep warm this winter, this is grotesquely obscene profiteering by BP,'' McDonnell said in an e-mail. ``The government must now act to control prices and introduce a windfall tax on these profits.''

At least 50 Labour lawmakers have lobbied the Treasury to impose a windfall tax on energy companies including Royal Dutch Shell Plc and utilities Electrictie de France and Centrica Plc, which have raised gas and electric bills in recent months. Unions that fund two-thirds of Labour's budget support the tax.

``A windfall tax on these companies here is an absolute must,'' Tony Woodley, head of the Unite union, said on Sky News. ``This isn't about competition. This is in a very closed market. We've got to do something now.''

Treasury View

Chancellor of the Exchequer Alistair Darling has ruled out such a levy, and Brown's office said BP profits add revenue to the U.K. Treasury through corporate taxation. Crude oil rose for the first time in three days today after futures touched $61.30 a barrel in London yesterday, the lowest since May 2007.

The Conservative opposition supported Brown's calls but stopped short of backing a windfall tax on the industry, which has told the Treasury it needs money to invest in keeping output flowing.

``BP have absolutely no excuse for not passing on any fuel price falls to customers,'' George Osborne, a Conservative lawmaker who speaks on finance, said in an e-mail. ``It would be a scandal if they do not.''

McDonnell challenged Brown for the leadership of the Labour Party in 2007 but never mustered enough support within the party to mount a formal challenge. Brown took over from Tony Blair as prime minister in June 2007.

``This scale of profiteering at a time of recession means that the time has come for the government to consider public ownership and control of irresponsible energy companies,'' McDonnell said.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net. Mark Deen in London at markdeen@bloomberg.net

Last Updated: October 28, 2008 10:21 EDT

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