BP – What’s The Score ?

Everybody’s jumping on the bandwagon. They’re all having a go at BP. Even President Obama is hammering them but what’s the real story about the oil spill and who will carry the can?

The first thing to say is that BP are only drilling in the Gulf of Mexico because the US has an insatiable thirst for the black stuff (although it looks brown on the telly) and were only too willing to issue licences to operators to allow them to drill there but that of course does not condone the apparent lack of care which accompanied the actual drilling and operation of the well, 5000ft down in the Gulf.

The other thing to mention is that there are a few companies involved in this fiasco, which is becoming more political by the day. BP actually ‘owns’ the oil well, or rather, the oil in it, whilst a company called Transocean are the operators – i.e. the people hired by BP to get the oil out of the well. However, two other organisations also have a share of the oil well, one of which is a Texas oil company. Has Obama had a go at them? Don’t be silly.

As The Daily Telegraph put it quite succinctly yesterday …… ‘ (they should) explain to these tub-thumping shysters that this terrible accident happened on an American-owned, Korean-built rig leased by BP’s American subsidiary. Transocean, the owner of the rig, left America for tax reasons and is now based in Switzerland but that must not allow it to escape its part in this.’

Now, if you’re beginning to switch off at this point, this disaster (after all several people were killed) affects virtually every one of us – or it will do. If you have a pension fund then BP are one of the most widely held shares in these funds and the fact that the company has lost about 1/3^rd of its value since the leak will most definitely reduce the value of that fund. Insurance companies who rely on BP’s share price and dividends to keep their prices competitive will see their income fall – that might mean insurance rates go up. If the US delays further exploration and drilling for off-shore oil, the oil price will rise and as a result, so will virtually everything else – petrol, transported goods, manufactured items – virtually everything we eat, wear and use!

But eventually the problem will be resolved and after a few years the polluted coast will get back to normal. And if saying that, you think I’m trivializing the problem, I’m not. Virtually every oil related ‘disaster’ area seems to have recovered much quicker than the so-called experts predicted and whilst I sympathise with those affected, i.e. the fishermen, the beach cafes etc , methinks that the US government in general, and Barack Obama in particular are going completely overboard on this and are driving the frenzy levels higher than they need be.

The President’s very aggressive stance against BP in threatening to ‘nationalize’ the company and suggesting that he’d sack the CEO (Tony Hayward), is completely bonkers and is all based on the fact that when Hurricane Katrina hit the Gulf Coast a few years back, good old George Bush didn’t really respond for several days and when he did, the response was totally inadequate. That was remembered when it came time to vote and Barack Obama does not want the same thing to happen to him in 4 years time.

So – where will it go from here? Hopefully, the latest attempt to ‘cap’ the well will dramatically reduce the amount of oil leaking from the well-head. President Obama will find another populist, voter-friendly cause to fight and leave BP alone to fix the problem. BP will inevitably end up in court over allegations that they told Transocean to install cheaper safety equipment which appears to have led to the initial explosion and if found guilty they will be find billions. And then there’s the usual lawsuits from everybody involved: the descendants of those who were killed; the injured survivors; those whose business are affected on the coast itself. The final total will be astronomical and as BP does not have any insurance cover (it covers itself as many large companies do) they will face a final bill of many billions – but let’s not forget that they were just about to pay out $10 billion this year alone in dividends – that’ll probably cover it.

And finally, I’ve just finished reading the book written by the last CEO of BP, John Browne. Despite the years of toil in the company and taking it from a predominantly British company to a global industrial behemoth , he was remembered for just two things – the Prudhoe Bay oil spill in Alaska and the Texas refinery explosion. He didn’t survive those – Tony Hayward won’t either.