BizWeek: BP Has Us Over a Barrel

We’ve been on the watch for BP’s PR line, and it’s been popping up at an alarming rate in the press.

We’ve heard about the beleagured British pensioners, who will be sent to the poor house if BP’s stock doesn’t return to the $60’s. We’ve seen stories about “Vladimir Obama” shaking down the poor, helpless oil goliath for $20 billion. And we’ve read about the mom-and-pop business owners (who on average own 20 stations each) who will get hurt if you don’t shop at BP gas station.

Now Bloomberg BusinessWeek tells us a weakened BP “would destabilize U.S. energy policy at home and abroad.”

I’m seriously skeptical about that, and Bloomberg doesn’t make a persuasive case for its stance. Here’s its “bottom line”:

BP controls strategically sensitive energy assets. Selling them may jeopardize U.S. energy security interests in the Middle East and Asia.

BP threatens the empire! That’s because the Chinese and Russians could come snap up its assets, the mag says, and that would threaten our energy security.

Problem is, gashing holes in a mile of water doesn’t do much for “energy security,” either—not to mention that whole environment thing. Nor can it be wise, if you step back and actually think about it, that we have to lament the fact that a foreign country may take over oil fields we need in another foreign country—this one in Russia’s traditional orbit. That’s what BusinessWeek is doing here:

“The company opened up Azerbaijan, a major producer in the Caspian Sea region, for oil development.”

Hey, that’s our not-ours oil!

What BBW (yeah, i know—hey, I didn’t name the thing) is talking about then is short-term energy security, which isn’t really security at all.

We’re dependent on shaky sources like that because we’ve long run out of the easy-to-tap oil. That’s brought blowback from our interventions (all, at base, over oil) in the Middle East for four decades now. What we’re seeing now in the Gulf is environmental blowback (blowout, more precisely) from chasing the black stuff ever further afield. And if you think the Gulf is hard to tap, read Rolling Stone on what BP is doing in the Arctic:

This fall, the company plans to begin drilling for oil near Prudhoe Bay via an oil rig it created by building an island — a glorified mound of gravel — three miles out in state waters. Because the island rig is connected to the mainland by a causeway, BP and Interior agree that the “onshore” facility is not subject to restrictions on “offshore” drilling. It’s the same kind of legal fiction that states like Indiana use to permit gambling on “riverboat” casinos that are permanently docked on dry land.

Here’s what BP has in store for the Arctic: First, the company will drill two miles beneath its tiny island, which it has christened “Liberty.” Then, in an ingenious twist, it will drill sideways for another six to eight miles, until it reaches an offshore reservoir estimated to hold 105 million barrels of oil. This would be the longest “extended reach” well ever attempted, and the effort has required BP to push drilling technology beyond its proven limits. As the most powerful “land-based” oil rig ever built, Liberty requires special pipe to withstand the 105,000 foot-pounds of torque — the equivalent of 50 Mack truck engines — needed to turn the drill. “This is about as sexy as it gets,” a top BP official boasted to reporters in 2008. BP, a repeat felon subject to record fines for its willful safety violations, calls the project “one of its biggest challenges to date” — an engineering task made even more dangerous by plans to operate year-round in what the company itself admits is “some of the harshest weather on Earth.”

BBW also says this:

The company’s demise would be disruptive to the American oil industry, given that BP is the largest oil and gas producer in the U.S., with about 1 million barrels per day of production. Some 7,000 of BP’s 23,000 U.S. employees work in the Houston area, many in a suburban office park just off the Katy Freeway.

From there the company runs its Gulf of Mexico offshore operations with a phalanx of engineers, geologists, and computer scientists. “These are highly compensated people,” says J. Robinson West, chairman of Washington-based consultants PFC Energy.

There’s a common misperception amongst the public, and some journalists, too, that if a company goes bust it just disappears off the face of the earth.

But if BP were to go under (a big if), it wouldn’t simply close up shop. Somebody would buy up those units and/or competitors would come in to take over the contracts. It’s hard to see how too many of those workers lose their jobs, even if somehow Congress allowed Gazprom or CNOOC to come in and take over.

The blogger Tyler Durden of Zero Hedge is smart to sniff out this press angle, noting the parallels to the too-big-to-fail banks:

As prospects before BP get darker by the day, and the likelihood of bankruptcy grows, the TBTF propaganda begins. Evidence A - Bloomberg headline: “BP Demise Would Threaten U.S. Energy Security, Industry.” Just as the failure of bankrupt banks was supposed to lead to the destruction of capitalism, so the bankruptcy of BP plc is now supposed to lead to the degeneration of US energy independence. And who in their mind would force the Chapter 11 of a systemically important company?

Indeed. The message is that if we know what’s good for us, we’ll go easy on BP.

They’ve got us over a barrel, so to speak. How convenient.

Further Reading:

WSJ Comes Up Short on BP Boycott Effects. Some of these stories read like PR plants.

More on Boycotting BP from the LAT.

Beleaguered Pensioners: It’s a good thing that BP investors are taking it on the chin.

The Economist Off the Deep End on BP and “Vladimir Obama.”

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.