Treasury-encouraged speculation that oil companies could be facing a windfall tax on their profits has been condemned as irresponsible populism by the City.

BP announced on Tuesday it had made profits of £5.58 billion in the first half of this year, though with most coming from exploration, production and refining rather than UK forecourt sales.

News of the profits, up 25 per cent on last year, led to a Treasury declaration that the government would consider public requests for a windfall tax on the companies.

"People are entitled to make representations on windfall taxes and they will be considered at Budget time," a source told the Mail, though the profits have not yet influenced government policy on the issue.

In his March Budget, chancellor Gordon Brown announced a two pence cut from petrol duty and a three pence cut from diesel taxes. The Treasury says it wants to ensure these cuts are passed on to consumers.

Brown ruled out a windfall tax in his pre-Budget report last November, saying the key issue is the level of long-term investment in the North Sea. "While it has been put to me that North Sea oil companies, earning higher profits from higher oil prices, should be subject to special taxes, I can tell the House that I am determined not to make short-term decisions based on short-term factors," he said.

The news of BP's profits also threatens to re-ignite the fuel debate which brought the country to a standstill last September when protestors blocked key oil refineries. The RAC Foundation described the oil firms as being "beyond fat cats".

However, City analysts said the Treasury was playing politics with the issue. "People seem to look at the large integrated oil companies and see the price of petrol at the pump, but the Government takes the lion's share," Jeremy Batstone, head of research at NatWest Stockbrokers, told the Press Association.

The Liberal Democrats also attacked the government. Trade and industry spokesman Vincent Cable said motorists were more concerned with tax than oil industry margins.

"It is irresponsible of the Chancellor of the Exchequer to dabble with populism in this way. He knows that the overwhelming bulk of oil company profits is made outside the UK, and derives from oil exploration. The real criticism of the oil companies is that they have been holding down prices too much in order to drive out independent retailers," he said.