Tuesday, June 22, 2010

Beyond Petroleum and Beyond Britain

Robert MorleyColumnist
Beyond Petroleum and Beyond Britain
June 22, 2010 | From theTrumpet.com
Britain may be about to lose one of its most strategic companies. Is it a harbinger for the nation?
British Petroleum’s rise and impending fall metaphorically mirrors the rise and fall of Great Britain—from insignificance to dramatic, even spectacular greatness, and now back again just as dramatically.
The story of British Petroleum is that of empire. It is one of Britain’s few remaining—perhaps even the last—vestige of and testament to a time when Great Britain truly was great. But it is also a story with a warning to a nation facing a collapse every bit as rapid as the downfall of its most strategic and historic energy company.
On April 19, BP was the fourth-largest company in the world—worth almost $200 billion. It pumped one out of every 10 barrels of oil in the world. The next day, explosions rocked the Louisiana drilling platform and one of the most promising oil discoveries in the Gulf turned into one of the greatest environmental disasters in history.
As the depth of the disaster sunk in, and as one fix after another failed, investor flight turned into investor stampede. As of June 21, BP saw half of its value—$100 billion—wiped out. Toss in the $20 billion escrow money BP was forced to set aside for damages and all the lawsuits that will drag on forever, and visions of the end of BP become very real.
All it took was one well gone bad to wreck a 109-year-old company that produces oil from thousands of wells.
But even if BP survives this disaster, its days are probably numbered.
Most big companies like BP find it very difficult to discover enough oil each year to replace what they pump—so they are forced to continually purchase other smaller companies to replenish their reserves. To finance these acquisitions, the big companies often use their stock like cash—but BP’s stock is now ruined. It is feared that the company is doomed to deflating oil reserves, or a share price inflated away through the stock printing presses.
At the very least, the company is now vulnerable to a buyout or hostile takeover.
But BP’s troubles go far beyond its 80,000 employees.
One out of every seven pension dollars in Britain came from BP—that is 14 percent of retiree paychecks. BP was considered one of the safest companies in the world to own, so virtually every pension fund in the country owned shares in the oil giant. The UK government receives more than a billion dollars each year from BP in taxes. In total, BP contributes tens of billions of dollars each year to the UK’s economy through direct cash injection—never mind the thousands of jobs.
A BP bankruptcy would be an economic disaster. It would be a national one too.
It is sad to see a company that played such an important part in building and preserving the empire fighting for its life.
Few people remember the integral role BP played in saving the nation.
BP’s roots go back to 1901. By 1908 it was on the verge of bankruptcy. According to the BP website, it was a small miracle that BP survived.
With creditors about to seize his home, William D’Arcy sent a final telegram to his representatives in Persia. He said simply: This is the last hole; drill to 1,600 feet and give up. After seven years of drilling and countless disappointments, it looked like the end of the road for the Anglo-Persian oil company—and not a barrel had been found.
Just days later, something that had never happened before occurred: They struck oil. The Anglo-Persian Oil Company that would one day become BP was back in business.
The importance of that date can hardly be over emphasized. Within a few years, Anglo-Persian Oil had built the largest refinery in the world. But it soon faced an unforeseen problem: It had too much oil and not enough buyers. 1914 changed all that.
With war looming, Winston Churchill lobbied hard to convince politicians to abandon the old coal-powered warships in favor of new, faster, more powerful oil-driven dreadnoughts. But politicians were reluctant to switch from using coal, which Britain had plenty of, to oil, of which it had none.
That’s where Anglo-Persian Oil entered the picture.
The excess oil couldn’t have come at a better time. Parliament relented to Churchill’s demands and the Navy began constructing diesel-powered ships. Six weeks later, Germany started World War i.
From that point on, until the mid 1990s when Anglo-Persian oil (then British Petroleum) was privatized, the UK government and Anglo-Persian Oil worked hand in hand to become one of the most powerful corporate-state combinations in history.
Oil-powered battleships revolutionized warfare. And because Britain controlled the oil, and the Royal Navy controlled the sea lanes, British power expanded like never before.
By the end of World War ii, the British Empire stretched from India to Australia to Canada. In Africa, the empire ran contiguously from South Africa to Egypt. Countless British islands and territories dotted the globe. The sun truly never set on the empire. And it was the Anglo-Persian Oil Company that fueled the trade and commerce that made the empire possible.
Later, as Great Britain began to lose its industry and its manufacturers became less competitive due to high taxes, labor and regulatory costs, and jobs moved overseas to non-unionized locales, it was British oil companies that increasingly picked up the share of subsidizing Britain’s social welfare state. Subsequent oil discoveries in the North Sea and Alaska continued to provide energy and money that not only powered society but gave Britain disproportionate political clout.
It is this icon of empire—this most strategic of companies—that is now facing the same plight as the country that it helped make great.
Just as the British Empire so quickly fell apart following the Second World War, so now may be the company that was so integral in preserving it during the wars.
Today, as BP has tried to distance itself from the oil industry’s dirty image, it has adopted the marketing slogan “Beyond Petroleum.” But that is not the most important issue Britons should be looking at.
What Britons need to know is what is beyond for Britain.