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BP and the oil price

Black gold, but at what price?

Feb 1st 2011, 14:42 by The Economist online

BP makes its first loss in 18 years

PROFITING handsomely from oil looks easy when prices are high. BP made an astonishing £56 billion ($103 billion) in the five years between 2005 and 2009. But when disaster strikes the cash can quickly leak away. BP reported its first loss since 1992 on February 1st. A one-off charge of £25 billion resulting from an oil spill in the Gulf of Mexico did the damage. With the oil price steadily rising because of popular unrest and uncertainty around north Africa and the Middle East, BP is expected to return to form before long. Indeed, the company reported a tidy fourth-quarter profit of £3.5 billion. It's hard, it seems, to drag an oil company down for long.

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Marco82 wrote:
Feb 1st 2011 4:14 GMT

BP dividend news should sweeten the blow for investors, like price increase has for the stock markets.
The BP of the future will be a smaller BP. But it will also be a safer BP, a more agile BP and a stronger BP."
http://www.mindfulmoney.co.uk/3086/investing-strategy/bp-pays-divdend-de...

Nurm wrote:
Feb 1st 2011 5:12 GMT

"It's hard, it seems, to drag an oil company down for long."

Diego-77 wrote:
Feb 1st 2011 5:43 GMT

Last June, BP share fell to 27$ from 60$. Mr. Market was quite depressed after the spill and, as usual, overreacted. He offered us a tremendous opportunity to buy a great company at a really good price.

TheGrimReaper wrote:
Feb 1st 2011 6:44 GMT

Even though BP profit tumbled in 2010 -and this dramatic drop is warranted seeing the scope of the environmental disaster the Deepwater Horizon oil rig explosion sparked- the British company should swiftly recover and catch up with its former astounding level of profit.

For sure the massive leakage caused in the wake of the oil rig explosion left some disaster-stricken zones marred irreversibly. The payback time has crept up in 2010, though tougher sanctions should have been taken according to me. Chastising and moralizing a billion dollar worth corporation holding a hefty clout over the oil market is always a tricky point. The oil industry is a strain, even a plague for governments. They hold sway over the prices of crude and can blackmail any weak State into complying with arbitrary rules. I'm not convinced that such a worldwide potence is definitely comforting and palatable. The question remains : Where does the decision-making authority lie today ? In the bosom of almighty firms and multi-billionaire corporations or still in the hands of governments ?

BP's future motives were broadly received as a model of apology from the company's then CEO Tony Hayward which roughly knew how to deal with hardships, to cap the leaking well as quickly as possible and to spring back from the 2010 failures. Yet several million of gallons of oil spewed out into the Gulf, plaguing a deteriorating seabed and slaying throngs of sea birds and swipping the livelihoods of thousands. The environment was horrifyingly damaged.

A single flagrant oversight and an egregious error of regulation and surveillance happened to be wrecking. This is not going to change, since BP lucre-driven activity and rapacious greed will maybe lead to yet another Exxon-Valdez-style catastrophe in the XXIst century.

Cutters wrote:
Feb 1st 2011 7:49 GMT

TheGrimReaper: Yet I doubt that many Yanks are going to be pushing for their president to punish what are clearly American oil companies polluting sites that were full of natural beauty in Africa and elsewhere.

What happened off the gulf of Mexico could have been sorted out quicker if US contractors and US officials had acted adequately. Maybe the US government should have become a share holder like the Russians.

JibrilAdam wrote:
Feb 1st 2011 8:48 GMT

Good. This company needs to pay the price of this horrible mistake. They need to stop cutting costs when it comes to safety.

Wayne Bernard wrote:
Feb 1st 2011 11:53 GMT

BP is also facing this $10 billion class action by 30,000 plaintiffs over environmental issues at its Texas City Refinery in the spring of 2010:



http://viableopposition.blogspot.com/2010/08/more-problems-for-bp-at-tex...

TheGrimReaper wrote:
Feb 2nd 2011 2:51 GMT

Cutters : If the regulatory and surveillance system had been more adequately prepared for this kind of disaster, The Deepwater Horizon explosion could have been eschewed. British Petroleum is almost thoroughly accountable for the incident, yet Halliburton and Transocean have to be held responsible for some mishandling and laxity over the safety conditions. They have allegedly indulged in approximate security norms on the drilling infrastructure. The blame should be therefore shared according to me. Though chasing down the perpetrator will not reverse the environmental cataclism that hit the shores of the US and of Mexico...

Tzimisces wrote:
Feb 2nd 2011 3:25 GMT

As long as they have reserves the profits will keep rolling in as oil becomes more scarce. How are the reserve ratios doing for the majors? I know the nationals are getting ever larger chunks of what's left, and new discoveries aren't keeping pace.

Lest anyone think I'm talking about a disaster scenario, I'm well aware that oil shale and coal gasification puts a ceiling on oil prices rises. It's a pretty high ceiling however.

Didomyk wrote:
Feb 2nd 2011 9:33 GMT

No one should ignore that BP is under pressure from the four members of the Alfa-Access-Renova (AAR) consortium, which shares ownership of TNK-BP 50/50 with BP, over its $10bn share-swap and Arctic exploration deal with Russian rival Rosneft.

The Rosneft deal announced by BP last month appears to violate the TNK-BP shareholder agreement that all Russian activities be pursued through the joint venture.

An injunction filed by the consortium and heard in the London High Court called for the deal to be halted pending a resolution by the two sides.

The AAR consortium members are ex-Russian billionaires Mikhail Fridman, Victor Vekselberg, Leonard Blavatnik and German Khan.

okne wrote:
Feb 3rd 2011 5:17 GMT

Hope BP gets back on its feet, but all the fines for the deepwater were justifiable. How many millions of gallons of oil leaked into one of the most fertile fishing grounds in North America? People today always want tougher regulations, in their perfect hindsight, and that's fine, but when you are a multi-billion dollar company operating a risky deep water well in an import ecological environment, then you better make sure your contractors and your equipment are all in line.

The fact that BP has seemed to cut corners in many of its American investments is troubling. But the sheer scope of this disaster, which made the Exxon Valdez look like a puddle in a pothole, took a terrible toll. When you are in position to make billions off the oil, you are in the same position to be 100% responsible when that oil costs innocent bystanders billions. It didn't help that the explosion killed 15 workers...

okne wrote:
Feb 3rd 2011 5:18 GMT

I also find it troubling that there was no back up plan, that they could not foresee a scenario where their failsafe failed. How does such a large company not have detailed contingency plans for such a risky venture?

Feb 3rd 2011 8:33 GMT

BP, and many companies, have sweetheart deals in which they fuel profits with interest-free longterm borrowing, often without having to put down collateral or even eventually repay the principal. Whether this is because our capitalist societies are not easily equipped to put a monetary value on the damage and destruction of nature, government's symbiotic need to please business in the shortterm or a secret desire of the human race to extinguish the species is debatable.
That such madness is not sustainable though, is a cruel security blanket upon which to curl.

Wayne Bernard wrote:
Feb 3rd 2011 11:41 GMT

BP is also facing this $10 billion class action by 30,000 plaintiffs over environmental issues at its Texas City Refinery in the spring of 2010:



http://viableopposition.blogspot.com/2010/08/more-problems-for-bp-at-tex...

happyfish18 wrote:
Feb 4th 2011 4:58 GMT

The loss is a tiny blip to the shareholders who should be grateful that the company is not stripped bare to compensate all the stake-holders.

A Young wrote:
Feb 4th 2011 2:32 GMT

The tone of this article strikes me as wrong. BP perpetrated one of the most serious oil disasters in history, and even after (rightly) paying dearly, their year-end losses were still relatively modest. If anything, the lesson here is not that "when disaster strikes the cash can quickly leak away," but rather that when you're making money hand over fist the occasional environmental catastrophe is a minor speed bump.

Feb 4th 2011 7:18 GMT

Amazing how quickly the world forgets. BP, British Petroleum, ....a company that caused one of the worst industrial accidents (Texas City refinery 2005, 15 fatalities, 170 injured) and for sure the worst environmental disaster in the history of the United States (over 50 billion USD in damage). A company that lied about disasters in Alaska (pipeline leakages) and in the Caspian Sea (gas explosion). One of the companies that recklessly exploit the resources of our world, hypocritically claiming that they do so in an environmentally responsible manner. Congratulations to those who invest in such an operation !

ejreed wrote:
Feb 4th 2011 7:52 GMT

And than there is Shell Oil to consider
Shell Announces Near-Doubling of Annual Profit
As gas prices at the pump put pressure on motorists pockets, oil giant Shell has announced annual profits of $18.6 billion. http://www.newslook.com/videos/288027-shell-announces-near-doubling-of-a...

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