Pressure has risen for a windfall tax on oil companies after Shell reported annual profits equivalent to £25 million a day.

Martin O’Neill, the chairman of the Commons Trade and Industry Select Committee, said that the oil giant should be "encouraged" to raise its spending on community projects after reporting a 38 per cent rise to $17.6 billion (£9.32 billion) in profits for 2004.

The earnings beat the £7.7 billion reported for 2003 by HSBC, previously the largest by a UK company, although analysts have pointed out that the oil and bank sectors use different accounting methods.

In the last three months of 2004, when oil prices peaked, the rate of earnings growth hit 204 per cent, with profits being reaped at a rate of nearly £30 a days.

Mr O’Neill said a windfall tax, which would follow the one-off levy on utilities seven years ago, would be appropriate if targeted at profits from UK operations.

"Shell operates across the world and it would be wrong to tax them for activities outside the UK and I’m not sure we could make it stick," he said.

"It need not be necessary to have a tax if the company was prepared to increase support for communities and social responsibility programmes. If they ignore that, the Chancellor needs to look closely at it."

His comments were echoed by Tony Woodley, the general secretary of the Transport and General Workers Union, who said condemned Shell’s profits as "obscene".

"With our pensions in crisis these profits are 9.3 billion extra reasons for a windfall tax," he said. "The government should grasp the nettle so everyone can benefit."

Shell’s figures appeared particularly questionable at time when motorists were paying more than 80p for a litre of petrol and gas prices had forced energy bills higher.

However, the AA Motoring Trust laid the blame for higher fuel prices on the Government rather than oil companies.

"It is the huge level of tax that does the most harm to UK fuel prices," the trust said.

"The market on the forecourt is very competitive and by shopping around, motorists can get themselves good deals."

• Shell's results were attacked by environmentalists for their reliance on fossil fuels whose consumption risked accelerating global warming.

  Tony Jupiter, the Friends of the Earth director, said: "Huge profits like this are only possible because Shell and other oil  companies are able to burden the rest of society with the pollution and climate change that is an inevitable consequence of their operations.

  "If Shell had to pay for the damage being caused by global warming, these figures would not look so good."

  The Government should introduce laws obliging directors to take "reasonable steps" to reduce social or environmental damage caused by their companies, FoE said.

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