Beyond Petroleum and Beyond Power

What a difference eighteen months can make. In July 2010 the United States was gunning for BP; President Obama had decided to call it, with a sneer in his voice, British Petroleum (nothing to do with me, Governor) and claiming billions of dollars as compensation for the oil spill in the Gulf of México known as Deepwater Horizon. Today BP, having paid much of the damages (although I am not terribly confident that the money has cascaded down to those who really suffered) BP declares profits for the last quarter of 2011 of $7.6 billion. The profits for the like period in 2010 were $4,6 billion.

The profits do not take into account any money BP proposes to claim from Halliburton as a contribution towards the damages that BP have paid as a result of Deepwater Horizon. They arise as a result of the oil price, which stayed at around $100 a barrel for most of the last three months of 2011. Brent Crude is trading higher at $114.

These prices should be viewed within the context of the present world economic circumstances. The economy of most countries is in a poor shape; it is not in such a poor shape as the media would have us believe, but things are not perfect. In a prosperous booming economy demand for oil would rise and that would inevitably cause oil prices to rise.

The other context in which oil prices should be viewed is the strength or weakness of the US dollar, the currency in which oil is priced. It is hard for markets to understand the right rate of exchange for the US dollar because understanding the American economy is difficult. There are millions of Americans who have lost their jobs recently and are facing the hardship of no work, food stamps and a bitter outlook. Yet it seems Facebook, a business that caters to our vanity, seems to be worth billions of dollars.

When it comes to the final analysis BP is getting richer and richer, like most rich companies and rich people, whereas the poor are getting poorer and poorer. That is the present way of the world and it is unsurprising that BP can make so much money even though it has poisoned much of the Gulf of México and had to provide $20 billion for cleanup costs. The surprise would have been if BP had actually lost money.

This is all part of the same point that we experienced when the banks went bankrupt. Governments around the world whose banks were broke felt that they had no choice but to pump cash into the banks so that savers could withdraw money that the banks owed them. The governments got the money from the present and future taxpayers. The governments could have let the banks fail and then sorted out the resulting mess, but they deemed the banks as too big to fail, and that seems to be the present status of companies like BP, the gas companies and the energy companies. These are very profitable now, but may not always be. There are so few of them and their size makes it very hard to understand exactly how profitable they are. They, like the banks, will not be allowed to fail, no matter how much environmental damage they do. They are more beyond the power of democracy than beyond petroleum.

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