BP’s doing the wrong thing

There’s no particular – even non-particular – reason why a company should last forever. It’s just a group of people within a legal wrapper attempting to specialise at a task.

If that task doesn’t need doing then don’t have the company:

BP boss Bernard Looney has one of the hardest jobs on the planet, transforming a sleepy oil giant into a serious force in renewable energy, or what he prefers to call “an integrated energy company”.

The sceptics think it is an impossible task but the Irishman makes it all sound so plausible, insisting that it “doesn’t need to be a choice” between prioritising green investment or returning cash to shareholders.

Yet the latest quarterly financial results from BP and Shell suggest it is precisely that. Despite forecast-beating numbers from both, payouts remain roughly half pre-pandemic levels despite a swift rebound in oil prices as the industry comes under severe pressure to spend greater sums on green projects.

Looney is walking a tightrope between keeping investors sweet with generous payouts and placating environmental campaigners who demand that BP retreats from oil-drilling and ploughs billions into wind farms, carbon capture, hydrogen and electric vehicle charging, and other low-carbon initiatives.

If BP is better at any of those tasks than a blank sheet company then by all means invest in those things. I think it unlikely that they are but then such differences of views are what make markets. However, that is the question that needs to be asked. Are they going to be better?

For there’s nothing wrong with saying, well, our task here is done, we’re going to wind down. We’ll sweat the last drops of profit from oil, return it all to share holders and fold. In fact, if that is what maximises returns to shareholders that is what they should be doing. And I strongly suspect that it is.

Not that I’m going to bet money on it – and don’t have enough to try it to see – but it wouldn’t surprise me in the slightest that putting the big oil companies into run off would be in shareholder interests. Buy one, stop investing in new fields, just run the ones already owned, pay down debt and shovel out the dividends. Plus, obviously, not spending one single red cent on anything green or renewable.

Because once there’s no need for oil – if that is true of course – there’s no need for oil companies. Die instead.

15 thoughts on “BP’s doing the wrong thing”

  1. Looney does sound like a good name for the looney. Certainly anyone who’d waste money on wind farms, carbon capture, hydrogen and electric vehicle charging has got to be a ratbag.

    Of course I believe that oil companies will still be flourishing a thousand years from now. Run naturally by all the black colonists flogging the primitive white greenies into doing all the hard work.

  2. It would definitely be better to focus on oil and I am sure BP could make good money out of it for hundreds of years.

    However, BPs share register is largely made up of large institutional investors, all of which have sucked on the green koolaid and will demand more green, even if it loses them money. Because it’s not their money and they don’t give a flying fuck about their policyholders or pensioners.

  3. Principal / Agent problem says owners don’t always get what they are due, particularly when it conflicts with the interests of the managers. It gets worse when many of those owners own indirectly, via etf and other funds, the mangers of which may have different goals again.

  4. You’re forgetting the Iron Law of Bureaucracy: whatever an organisation was initially set up for, eventually its primary purpose becomes its own survival.

  5. Robbo and MC are spot on. One of my (ex)work pension schemes has gone green as it apparently considers climate risk to be so important the DC scheme members need protecting from it so the fund range if moving to net-zero or sustainable funds only.

    Completely unnecessary given most of the money is in stuff like Alphabet, Apple and Amazon in both types of fund. It’s a marginal amount in oil and gas etc. Complete bar stewards at the pension scheme require me to sell and repurchase the same assets for their own virtue signalling. But if it’s a momentum trade I’ll get on it straight away. I reckon we’ve got 12-18 months more before it all pops.

  6. Are there any Evil Bastard™ oil companies who plan to continue finding and extracting the good stuff that one could invest in? Or are they all falling into the woke trap?

  7. Good point Jim. The latest sinister conspiracy I’ve read about in the media is the Chinese moving into the Middle East. So I suppose that we’ll be buying all our oil from the heathen Chinee in future.

  8. I’d give them a chance with carbon capture. If you can concentrate CO2 you can feed cyanobacteria with it and make oil.

    wind farms etc are out of BP’s range, distribution is by wire, not pipe. There are few charge points at petrol stations because they lead to a cluttered car park when you want passing trade for the CTN and booze offer.
    Charge points should be in out of town parking: cinemas, large malls, etc.

    The Hydrogen boondoggle is particularly otiose. Making the H2 is energy inefficient compared to ready made natural gas, of which there is no shortage. And will require ripping out and reinstalling 18,000 miles of gas distribution (not counting the last bit to your home).

  9. BP should be seeking an entirely natural, biodegradeable, and renewable alternative to fossil fuel.
    Buy whaling ships and harpoons, the Greens will love you for it.

  10. If moronic shareholders are happy for BP to go then that’s their problem. It should open a gap in the market. To thrive any new company will have to beat the state. But the truth is that to survive we will ALL have to beat the fucking state so the sooner we start the better.

  11. As far as I can see oil companies’ plans are to mouth gree and renewable platitudes until the whole net zero boondoggle runs out of steam when the plebs refuse to pay for it while India and China carry on merrily polluting the world

    2 years max

  12. There’s always a need for oil.

    The fuel bit is nice, but there’s a hella lot other stuff extracted from oil that we use, and cannot replace/synthesise commercially… People tend to forget that bit..

  13. I don’t think there’s much chance of a large company deciding to liquidate itself due to its purpose going away. Not when staff salaries are tied to share value, which would obviously be very unlikely to rise once such a plan was announced. In fact, many companies operate with insufficient realisable assets to cover their shares (due to the expectation of future profits being valuable).

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