BP discovers it’s an oil company after all
Meanwhile, the CCC is proudly pointing to the UK’s falling energy demand, failing to mention that the cost of energy is driving manufacturing overseas.
The co-incidence was irresistible. The day after the UK’s Climate Change Committee told us to use a lot less oil, along came BP to tell the world that it had discovered that it was an oil company after all, because that’s where the money is. Making money is, after all, the purpose of any commercial enterprise, since if it does not, it has no long-term future.
BP’s lesson has been hard-earned. Indeed, it had to be taught it twice, once under John Browne’s “Beyond Petroleum” and again under Bernard Looney’s plan to go from black to green. It all looked so plausible - at least to the BP board - that an energy company could prosper finding new forms of it for old. After all, we were told that windmills and solar panels would provide low-cost power while saving the planet.
The BP shareholders didn’t buy it, and as the strategic mistake became apparent, the share price of the competitors left BP’s floundering. Markets are like that. They follow fashion and get carried away, but in the end, reality bites. Unfortunately, the Climate Change Committee is not in a market. As a result, it can go on drinking the Kool Aid long after the energy market is signalling that it is hallucinating.
This week’s CCC report makes Alice’s Red Queen look rational. It proudly points to the UK’s falling energy demand, not mentioning that manufacturing is being driven overseas by the policy of high prices. It says we are going to have to fly a lot less, drive an electric car, install heat pumps and cut down on the kebabs. When we have done all this, running a green economy will mean lower electricity prices.
This is a fantasy. Even if we were to accept a big fall in our standard of living, the cost of offshore wind is rising, not falling, despite the government’s efforts to disguise the true price. Rising subsidies are required to persuade operators to bid for generating contracts, and the cost of reconfiguring the entire electricity grid is not even in the calculation. Meanwhile, keeping the lights on when the wind doesn’t blow adds further to the cost, with gas-fired stations standing idle for most of the time. Acceptance that burning wood pellets is somehow “renewable” reflects the CCC’s departure from rational analysis.
As for BP, it may be lucky to escape a takeover bid. It would be a sitting duck for a takeover by Exxon Mobil or Chevron had both of these US rivals not just spent tens of billions of dollars buying other domestic oil companies. After so many management blunders, BP hardly deserves to survive as an independent entity, but it probably will. Assuming it now acts like an oil company, of course.