Tag Archives: bp

Technical BP question, or ‘lazy crowdsourcing’

So, on BP, let’s assume that it gets so busted by compo claims that its entire US business gets liquidated and sold to Exxon (as seems to be the current, insane narrative: “we’ll pretend BP are evil rather than the same as everyone else, so we don’t have to stop the drilling and the oil greed…”. I don’t think it’s an anti-British thing, by the way – I’m sure that if Exxon had been the unlucky chaps, they’d’ve got the whole take-one-for-the-team treatment.)

At that point, the American liabilities are ringfenced, and BP can continue to do as it does in the North Sea, Asia and Africa, bringing quantities of money that are undeniably copious, albeit less large than its shareholders pre-spill might have hoped.

At that point, British and Chinese BP shareholders are perfectly safe in their holding of the company. But what happens to American shareholders? Is there a mechanism by which the US government could appropriate US-held BP shares, and is it an ‘unprecedented, practically war’ thing or a ‘yeah, we do this’ thing if so?

…which brings the technical question: is there any divergence between movements in BP shares on the LSE, and BP shares on the NYSE? That would be an interesting indicator, if so…

Shorter US public response to Deepwater Horizon

“Dear Big Oil. Yes, we know this sort of thing is inherent to oil extraction, and we do still want cheap oil extracted – but please can you do it in places where instead of oiling up a few American pelicans and ruining American banjo-playing yokels’ weekends by making them kill land animals instead of sea animals for fun, it instead kills large numbers of foreigners? Nigerian, Iraqi, Timorese, Uzbek, Scottish, whatever, as long as we don’t have to think about the consequences of our actions. Thanks, The US Public”

Semi-relatedly, I hadn’t realised that Tony Hayward was a drilling engineer by background, rather than a generalist suit. That’ll be why BP has been focusing on containing the spill, rather than running a super-slick PR campaign, then.

When Good Contrarianism Goes Bad

So, I come up with a contrarian view on the BP issue that I don’t 100% hold, but which is a genuine aspect of the story and which has been completely neglected in any of the coverage I’ve seen. I mention it on Twitter, I spend a couple of days thinking about it, and then I write it up for a blog post.

…and then, the same bloody day, the sillier ends of the UK press have the same idea, although with far less research and more pointless nationalistic ranting. Had I known they were going to do that, I wouldn’t have bothered – there’s a difference between contrarianism where you float a viewpoint that nobody’s promoting, and Clarksonism where you float a viewpoint that lots of people are promoting and pretend that you’re being oh so brave and daring for doing so. The latter is no fun at all, and even the perception of the latter is a bit embarrassing.

Anyway.

There are elements of Obama’s public references to BP that can only be explained by Brit-bashing. The underlying problem in the US oil industry is regulatory failure, and if the US oil industry were to operate under the same regulatory framework that the UK oil industry adopted after Piper Alpha, then the disaster wouldn’t have happened. And the best way to deal with safety in general is the aviation industry’s one of heavy, preemptive regulation, with accident inquiries that avoid blame and stick to making recommendations that are enforced, rather than doing nothing until there’s a disaster and then throwing around massive amounts of blame and infinite lawsuits [*].

I’m in two minds about the US administration’s behaviour at the moment, though.

As I mentioned in comments to the other post, I don’t understand their strategy here: the incident is fundamentally George Bush’s fault, in that his government deliberately cut regulation from its already poor start and also granted permits for unprecedentedly deep-sea drilling, which the current government has had no time to fix. Any UK or Australian PM worth their salt would be milking this fact for all it was worth, and saying “unlike our inept, industry-beholden, corrupt predecessor, we’re going to create a proper regulator to ensure this doesn’t happen again”.

But assuming that slating former presidents is off the menu in US political debate, and given that the public are baying for blood, I can see what they’re doing on self-preservation grounds. And if it ends up with BP paying the expected actual cost of $20-30bn for the cleanup, compensation, and fines for any specific violations that led up to the disaster, and not being charged crazy punitive damages, expropriated, kicked out of the country, or similar, then that’s a reasonable outcome.

Whether the fact that the markets seem to think a worse outcome is likely is because there’s a genuine political risk that Obama is going to go Putin-y on foreign investors, or whether it’s because markets are paranoid beasts at the best of times, remains to be seen. I’m not sure it’s a good thing that the US president is using the kind of rhetoric that makes markets believe he might – but I’m not sure he has much of a choice.

In short, let’s see what happens. If the end outcome is a reasonable settlement, coupled with massive increases in regulatory requirements, enforcement and spending in the US oil industry, then bring it on and three cheers for Mr Obama.

[*] relatedly, my attitude towards dead oil rig workers is very similar to my attitude toward dead volunteer soldiers: “that’s sad for you and your loved ones, but it’s also why you were paid so much more than someone with your skill-base could have earned in a job that didn’t have a substantially elevated risk of death”.

On helping Americans to steal your pension

Let’s assume that, like most UK workers, you have a pension fund with a substantial part of its investment in FTSE companies, usually weighted by value.

What should you care more about:

1) the fact that the US government is attempting to steal a sizeable proportion of your money?

2) some fucking cormorants?

Clue: if you picked 2, you’re an idiot.

So could British people perhaps stop ragging on BP, or pretending the Gulf of Mexico spill is some kind of serious environmental disaster that’ll actually harm people (rather than making beaches look untidy for a bit and topping some fish and birds)?

The spill will cost about $20-30bn to clear up, including compensation for those directly affected, which is a sum that BP should have no problem in paying, and which would be the fair price for them to pay.

The fact that BP’s share price is below levels reflecting that cost, and that BP bond yields have increased to junk levels partly reflects market panic – but also partly reflects genuine fears that the US will do something truly vindictive, using its demonisation of BP as an excuse to steal its (i.e. ‘your’) assets beyond the cost of cleaning the spill in some form of punitive damages.

And everyone who brings out the whole ‘ooh, BP is so evil and unsafe’ saw (it is not; it is as evil and unsafe as the rest of the oil industry, whose levels of evilness and unsafety are set by national governments in oily countries. BP’s safety culture in its US operations is no different from ExxonMobil’s, Shell’s or Chevron’s – it was just the unlucky one this time round) is enabling that demonisation campaign.

The oil industry should be reformed. It won’t get reformed, because we’re too dependent on cheap oil, and the occasional disaster is collectively viewed as a fair price to pay for the ability to pay under $3 a gallon for petrol. Especially when the disaster in question doesn’t happen to Americans: how many people are even aware of Shell’s operations in Nigeria?

But the US’s anti-BP crusade has nothing to do with any efforts to reform the industry – it’s an attempt to distract Americans from the fact that the disaster is primarily their own fault (and that nothing will be done about it in the long term because the American people won’t stand for expensive petrol), and to steal some foreign assets into the bargain.

So unless you’re a stars-and-stripes-waving redneck, don’t join the anti-BP campaign just because you think the world would be a nicer place if companies were nicer…

Update: Turbo-LOL.