Friday, June 18, 2010

Why BP Is So Bad

As one the world's largest oil companies, British Petroleum is also one of the worst when it comes to safety. If I recall, more than 126 workers have died in recent years working for BP. With this oil spill, it is all too obvious that too many shortcuts were taken on the Deep Water Horizon well in the Gulf of Mexico. Over the years, BP has accumulated over 760 safety violations while a U.S. Company, Exxon-Mobil, had a single violation.

But, how is it that they are so bad in comparison to the other big oil companies like Exxon-Mobil? Well, to answer that you have to simply look at an extremely brief history of BP as a corporate entity.

Up until the late 1980's, they were principally owned and operated by the British government; and, I think, therein lies the problem. Even though Marget Thatcher was able to privatize BP, the culture of a government-run operation was ingrained in their corporate mindset. In effect, BP is to the oil industry what our post office is to the freight and shipping business here in America. It is a poorly run and incompetent company that probably shouldn't be allowed to drill anywhere in the world.

Obama and his people should be careful with all the promises that they seem to be getting from BP. That escrow account ($20 billion over "four" years) could very well wind up being a dry well and just a pipe dream. To understand this, you have to recognize how BP operates. They are an arms-length company; meaning that they have little or no hard assets of their own. As much as possible, they lease equipment and contract services. For example, the only thing they owned with regard to that failed oil rig in the Gulf of Mexico was the lease allowance to drill the oil; and, that was sold to them by our own government. They contracted that whole operation. So, in all too many cases, if BP does go belly-up in bankruptcy, the only things of value they own that our government could glom onto is a bunch of oil leases that actually belong to us anyway. And, I doubt very seriously the we could even tap any of the foreign assets of the British company without years of litigation in international courts.

The bottom line is that the oil spill was caused by an incompetent company. But, too, it was our own government's failure to properly supervise BP's operations.

The Minerals Management Service (our government) is just as responsible as BP for that oil spill. They should have been all over them; especially because of their known past behavior. For sure, BP is a bad company but, it was our government agency that failed to oversee them and allowed them to live up to it's very bad reputation. And it was the combination of government-run mindset (in the case of BP) and the typical failed bureaucratic behavior of the Minerals Management Service that, in combination, was a lethal mixture. When all is said and done, we are going to find out that BP took too many shortcuts and we will also find that it had the tacit approval of the very government agency that was supposed to watch over them. For this reason, anyone who believes that a government-run anything is better than the operations of the private sector ought to have their head examined.

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