Business Opinion/John McManus:Last week's decision by Conoco Phillips to put the Whitegate oil refinery up for sale with a price tag of $500 million raises a host of interesting and, for the Government, potentially embarrassing questions.

The most obvious is why the State sold it just over five years ago for a mere $100 million. In fact, when the various other elements of the deal are taken into account - including the State assuming responsibility for Irish National Petroleum Corporation's €90 million of debts and guaranteeing its environmental liabilities - it was practically given away.

It also has to be remembered that included in the €100 million deal was the oil storage facility at Whiddy Island and an office block in Dublin. Neither of these assets are now up for sale.

The prices cannot be simply explained by economic circumstances, but that is certainly a factor. The INPC deal was struck in the aftermath of September 11th, when crude oil was languishing at $25 per barrel, and few foresaw its steady march over the following five years to the $70-plus per barrel price it hit last year.

Turnover at the refinery has indeed grown massively as the price of oil rose in the five years since it was sold. It has jumped from €295 million (about $250 million at 2001 exchange rates) to $1.65 billion in 2005, the last year for which accounts are available.

But the cost of sales has pretty much kept pace, increasing from €280 million in 2001 to $1.6 billion in 2005. As a result, profits have only grown from €12.2 million ($10.4 million) to $12.23 million in 2005, although it should be noted that the 2001 figure was boosted by an exceptional item without which profits would have been closer to $1 million. Against that, the refinery lost almost $20 million in 2004.

Also of interest is the net asset position of the business, which grew from €26.6 million ($23 million) to $52 million. Staff numbers have fallen from 161 to 153, while payroll costs have doubled from €11 million ($9.4 million) to $23 million.

It is difficult to draw any hard and fast conclusions in the absence of the 2006 figures for the refinery, but there does not seem to be any real evidence of significant improvements in efficiency or some other factor specific to the operation of the refinery under its new owners which has resulted in the spectacular increase in its value.

What would appear to have worked in Conoco's favour is the global shortage of refining assets. This has meant that the same factors which drove the prolonged rise in oil prices also drove up the price of refineries.

Your view on how much of this could have been predicted in 2001 will inform your opinion on whether the State got a good deal in 2001 or was taken to the cleaners by Tosco, the small US oil company which bought Irish National Petroleum before itself being taken over by Conoco Phillips.

In the State's favour is the fact that the sale to Tosco came about after a tender process, but without knowing the details of the other offers it is hard to how much comfort can be taken from this. Yet it would seem obvious that prospective buyers were not beating down the door.

The other factor that has to be taken into account is the climate of the time. Following the Irish Steel debacle, the view was widely held that the State should exit business when there was no longer a strategic argument for it to remain involved.

This was not so much an ideological position as a pragmatic one, as flourishing State businesses had an unhappy knack of becoming costly and unpleasant failures, as was the case with Irish Steel and later Irish Fertiliser Industries.

In and around the time that INPC was sold the State also disposed of ACC Bank to Rabobank. Again, five years later, the deal seems to have been akin to daylight robbery.

Rabobank paid €130 million for ACC, which was only 90 per cent of the bank's book value. Some €24.5 million of this was passed on to staff by way of an employee share ownership trust and ensured stable industrial relations for the new owner. The State also underwrote ACC's exposure to a controversial hotel development to the tune of €10 million. The bank made profits of €27.4 million in 2005, again making the State look a bit like a patsy.

But the fact that these two companies went on to be both successful and valuable does not negate the logic behind the State selling them. If anything, it serves to confirm the notion that there was absolutely no need for the State to continue to support them. That said, it would be nice if the taxpayer had got a somewhat better deal. In many ways the most surprising thing about the sale of Whitegate is the complete silence of those who might be expected to highlight it as yet another example of the folly of privatisation. The unions and other opponents of privatisation may yet make their voices heard, but two aspects of the INPC deal may serve to soften their cough. The first was the guaranteeing of the Whitegate workers' jobs for 15 years and the second was the €10.5 million they received under an employee share ownership trust.

One is reminded of the definition of an honest politician as someone who, once bought, stays bought.