Looking to invest in oil? Here's one firm to avoid

***Looking to invest in oil? Here's one firm to avoid

***Let's have a windfall tax on MPs

***RECOMMENDED ARTICLES: The dollar is still skating on thin ice... What the fall of China means for America...

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You would think running a giant oil company would be a pretty cushy business in the current climate.

Oil prices might have come off their pre-Katrina highs, but crude prices are still up around 30% on a year ago. And recent moves have seen crude head back above $60 a barrel in the States.

But Royal Dutch Shell's problem is it just can't seem to find enough of it...

Shell admitted at the start of last year that it had been overstating the number of oil barrels it had in its reserves by about a third. Since then, there seems to have been a steady stream of bad news. The reserves debacle unfolded across most of 2005, with regular downgrades as the extent of the problem was uncovered.

Then there was the embarrassment of seeing former oil minnow Cairn Energy turn into a FTSE 100 company, on the back of an Indian oil field it had bought from Shell in 1997.

More recently, the budget for developing Shell's 55%-owned Sakhalin-2 gas field in Russia doubled from $10bn to $20bn.

As if that wasn't enough, Shell was also the oil major which suffered most in the US hurricane season. Its Mars offshore platform, which pumped about 5% of its oil, is unlikely to open again until at least the middle of next year.

Now the firm has said it is to spend an extra $4bn a year in its attempts to find more oil, raising capital spending from $15bn to $19bn. But only about half of the money will go into developing new projects much of the rest is the result of higher costs.

Shell isn't the only one suffering higher costs. Rising rates for drilling rigs and other input prices, such as steel, have made life more expensive for everyone in the sector. Chevron has already had to boost its own spending by 35% partially because of the increased costs of drilling oil. BP's capital spending is set to rise by $1bn to $15bn.

But Shell is the most vulnerable of the oil majors. At current rates, the company's oil and gas reserves will run out in less than nine years that's the shortest life span in the sector. And according to Citigroup, the extra spending also means that Shell is in a worse position than its rivals to buy back shares. The company needs oil to remain at or above $40 a barrel to cover its investment and dividend spending.

It's "yet another reason why Shell's 5% to 10% discount to BP...shouldn't narrow any time soon," says Fiona Maharg-Bravo on Breakingviews.com.

Another problem with running an oil company just now, of course, is it makes you a sitting duck for envious politicians. Gordon Brown's massive tax hike on North Sea oil producers is set to bring in about £2.3bn a year in extra tax.

Strangely enough, £2.2bn is the amount that was overpaid in tax credits during the first year of their operation. And now Mr Brown's widely-criticised pet project is back in the news because it turns out that as many as 13,000 Job Centre staff might have had their personal details stolen by criminals making fraudulent claims, says the BBC.

Liberal Democrat work and pensions spokesman David Laws described the system as "almost a fraudster's charter" which allowed "telephone claims and internet claims" to be made too easily because of the tax office's desire to increase uptake of the credits.

You'd think it's bad enough that Mr Brown has been taking from the oil companies to give tax credits to fraudsters. But now one of his fellow MPs, John McDonnell, wants him to start on investment bankers. Writing in the pages of the Mirror, he called for the bonuses of "City fat cats" and "wide boys" to be taxed to solve the financial crisis' facing the NHS.

This financial crisis' refers to the £650m-or-so overspend that the NHS has managed to rack up this year. This is despite receiving record spending increases for more than the past six years, according to the FT.

Mr McDonnell forgets to mention that the fat cats' already hand over 40% of their hard-earned to the Government. The Government in turn has squandered that cash on dodgy tax credits and on hiring "five-a-day coordinators" at £25,000 a pop to teach people how to eat more fruit.

The Chancellor's pre-Budget report has already shown that three-quarters of this year's extra spending on the public sector has been swallowed up by wages and related costs, according to The Business.

So we've got a better idea. The Government has raked in bumper levels of tax without delivering a corresponding improvement in services. So maybe it's time it gave something back.

MPs earn £59,095 a year, roughly two to three times the average salary, depending on the figures you use. They get the best final salary pensions available, at one fortieth of their annual salary for every year that they work. That compares to one eightieth for a nurse, and of course, nothing for the typical private sector worker.

So why don't we have a windfall tax on these particular fat cats to bail out the NHS? Let's all email our local MPs with the suggestion - and who knows? Perhaps Mr McDonnell and his chums might suddenly find ways to make better use of the massive sums of money they already get rather than constantly yelping for more.

Turning to stock markets...

The FTSE 100 closed 6 points higher at 5,507. Oil heavyweights BP, Cairn Energy and Royal Dutch Shell made gains as oil stayed above $61 a barrel in New York. Confectionary group Cadbury Schweppes fell 1% to 544p as it said it wouldn't meet its profit margin target despite strong growth forecasts for 2006. Meanwhile, online poker group PartyGaming continued to fall, down 6% to 128p.

The FTSE 250 rose 16 points to 8,517, a new all-time high. But regional newspaper publisher Johnston Press fell 4% to 457p as it warned that underlying advertising sales had fallen 6.7% in the five months to November, with no signs of a pick-up in sight.

Over in continental Europe, the German Dax Xetra gained 9 points to 5,310 while the Paris Cac 40 climbed 20 to 4,693.

Across the Atlantic, US stocks moved higher. The Federal Reserve raised the key interest rate to 4.25% as expected, but investor focus fell on changes to the accompanying wording, which was taken to suggest that rates might stop climbing as early as the first quarter of 2006. The Dow Jones rose 55 points to 10,823, the S&P 500 gained 7 to 1,267, and the tech-heavy Nasdaq rose 4 to 2,265.

In Asian trading hours, oil was trading at around $61.40 a barrel in New York, while Brent crude was trading at around $58.40.

Spot gold took a tumble to around $513 an ounce, continuing its fall from Monday's 25-year high of around $540. Meanwhile, silver fell back to around $8.41 an ounce, a two-week low.

In Asian stock markets, the Nikkei 225 slid 314 points to 15,464. The Tankan business confidence index showed that sentiment is at its most upbeat for a year, but the reading wasn't as strong as some analysts had hoped. Exporters also fell back on worries that the yen will strengthen against the dollar if US interest rates stop rising soon.

And in the UK later this morning, data is likely to show that the number of people out of work and on benefits rose for the tenth month this year during November.

And our two recommended articles for today...

The dollar is still skating on thin ice

- The dollar remains in long-term decline, says Charles Stanley's Jeremy Batstone. It is only a matter of time before the US is forced to get to grips with its massive trade imbalance. To find out just how much pain that could inflict on the US economy as a whole, see: The dollar is still skating on thin ice.

What the fall of China means for the US

- Once upon a time, China was one of the most technologically advanced and powerful empires on the planet. But protectionism and government interference put paid to all that, says Chris Mayer in Whiskey & Gunpowder. To find out what parallels can be drawn with America's current situation, and to learn why China is 'the world's largest turnaround opportunity', click here: What the fall of China means for the US.