Speaking up for BP: cross your fingers but be patient
Here are three propositions which may be true of BP and the fatal Macondo blow out and oil spill. I hope they are and anyway they suggest that at this moment we know little about what BP did and next to nothing about what will happen to it. Some of these questions will take a couple of years to answer and it’s unlikely that any will be answered within months.
(1) BP may not have behaved very badly;
(2) BP may not have caused an ecological disaster;
(3) BP may survive this whole event financially intact.
(1) BP may not have behaved very badly
At this moment, it is easy to condemn BP for having opted for cheap and risky rather than expensive and safe options in its management of the Deepwater Horizon well. But that’s still largely guesswork. With respect, even the forthcoming Panorama expose is unlikely to settle matters.
Of course, BP seems almost as unattractive as possible just now. Corporations in BP’s current position simply cannot risk mea culpas. After its awful record of accidents in the US, one would have thought that the CEO might have been all over the work in the Gulf. Instead, Tony Hayward’s pleas of ignorance look like indifference, which they surely aren’t. Equally, it is easy to say that BP’s choice of a chairman from Sweden seems crass granted that it did so much business in the US, and had an awful reputation there. There is talk that a policy of self-insurance did it no good.
But, as Mr Hayward kept telling the House energy subcommittee on 17 June, much of this will be dealt with when the evidence is solidly available. In the meantime, as was little reported, he told the committee that the ultimate responsibility rests with him. No-one would have wanted him to be sharing blame with partners, contractors, regulators or politicians.
The point here is that it will take months before it is possible to apportion blame.
(2) BP may not have caused an ecological disaster
An ecological disaster has to be wide-ranging, long-lasting and deeply-serious to count. I don’t think any of the historically well-known oil spills have qualified. This one may break the mould. But I would hazard a guess that it hasn’t yet. We are praying or crossing our fingers, of course. Storms and hurricanes may be the factor that makes things much worse, but they also have demonstrated their own clean-up potential.
The point here is that it will take months or years before we know the ecological impact.
(3) BP may survive this whole event financially intact
In times of crisis share prices fluctuate very wildly and often don’t reflect the real value of a firm or its assets. It is at least possible that BP will be able to draw a line under its liabilities following this fatal accident and spill. Even if these are framed as pessimistically large, but are at least framed, the firm may re-emerge as viable and strong. I am no expert, but it seems unlikely that any rival would bid for BP in the present state of uncertainty. Presumably any such bid would raise the share’s price very quickly.
I don’t suppose the firm’s survival matters, provided its shareholders and employees come out of the chaos in fairly good shape. But I wish I were rich or bold enough to buy BP shares now.
The point is that we perhaps won’t know the financial effects of this accident for months or years.
Declaration of interest: In 1996 BP paid for my expenses as I investigated charges that it was behaving badly in Colombia. My conclusion was that it was a responsible firm doing good in the country. (Shell had earlier paid my expenses for an investigation of its operations in the Niger delta of Nigeria, which reached similar conclusions.) I often wrote damning BP’s “Beyond Petroleum” mantra which distracted its audiences from the firm’s real obligation to be competent.