Oil giants BP & Shell have both been hit by the weak economy and its detrimental effect on the price of oil.

This week, two of the biggest oil companies have announced massive drops in profit in their Q2 results statements – both blaming the massive drop in oil prices since last summer for the fall.

Shell announced profits for the last quarter – to 30 June 2009 – of $2.3 billion (£1.4bn), compared to $7.9bn a year ago, slumping more than $1bn compared to Q1 2009.

The Anglo-Dutch oil company blamed the losses on a frail global economy, a weak demand for energy, together with high industry costs and a fall in the price of oil, which fell to a low of $30 a barrel earlier this year, compared to a record high of $147 last year.  It has since recovered slightly to $63.

Royal Dutch Shell CEO, Peter Voser, commented: “Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery. Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability.”

The CEO also said the oil giant would be looking at new ways to reduce costs in order to maintain shareholder value, and it has a number of cost-cutting initiatives in the pipeline.

BP revealed a similar set of results earlier this week, when it saw its Q2 profits more than halve to around $3.1bn, compared to the previous year. It also attributed the losses to a fall in the price of a barrel of oil.

However, Tony Hayward, BP’s Group Chief Executive, remained quite upbeat about the future. He said: “Production is expected to grow again this year. Costs are coming down and capital efficiency is going up.

“We’ve made good progress over the last couple of years but there’s no room for complacency. We have a clear strategy that we’re delivering and today’s [28 July] results give you an indication of the progress we’re making.”

Shell’s share price fell 13p at the start of trading on the London Stock Exchange. BP suffered a similar fate on the stock market when it announced its results, though its share price has started to make a recovery.