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.