Friday, June 16, 2006

Helpful Hint to the Greens: They Don’t Make Trees at BP

BP’s Accidents Put Its Celebrated CEO On the Hot Seat

So reads today’s Wall Street Journal above a story about environmentally-unfriendly accidents at BP.

For those unfamiliar with it, BP has been transformed from a stodgy old oil and gas company by its impatient and intense CEO, John Browne, into a world energy powerhouse through acquisition and big bets on new drilling frontiers while—according to the Journal—“embracing the green movement years before it was cool in the executive suite.”

Call me a cynic, but as far as I can tell, Lord Browne’s “embracing the green movement” involved placing cheery ads about the company's environment awareness in the Wall Street Journal and the New York Times while replacing the old BP gas station signs with cheery new gas station signs that have a brightly colored green-and-yellow sort of sunny logo implying ecological enlightenment.

Otherwise, those gas stations appear to operate pretty much the same way they always did, by which I mean dispensing volatile fuels for combustion engines which are destroying the atmosphere of the planet.

Still, it seems the greens were so taken with Lord Browne’s slick marketing campaign and sunny new gas station signs that “Vanity Fair featured him in its recent environmental issue alongside such green darlings as Al Gore and Julia Roberts.”

Now, the Fate of the Earth got a lot of press recently when science genius Stephen Hawking told an audience in Hong Kong that earthlings better start visiting other planets near us, and soon, in order to escape ecological devastation and other possible disasters that we have already inflicted on ourselves or will be inflicted upon us.

And while I’d like to think a sudden call to action will save us from the worst, I happen to think we’ve already gone beyond the point of no return as far as global warming goes—ethanol initiatives or no ethanol initiatives—and I can’t imagine what the greens are thinking when they make the CEO of BP their corporate hero.

I have news for the greens at Vanity Fair: the “P” in “BP” stands for “Petroleum.”

BP’s goal in life—its entire reason for existing—is to extract crude oil from wells drilled in environmentally irreplaceable areas such as northern Alaska and the Gulf of Mexico, transport it via oil-leaking pipelines or water-polluting tankers to pollutant-emitting refineries which operate 24/7 distilling the crude via energy-intensive, atmosphere-warming processes into a range of products that either permanently scar the land (asphalt), pollute the air (diesel, kerosene, gasoline) or destroy the atmosphere (solvents).

And to do all this in such a way that British PETROLEUM shareholders make money.

Now, it happens that today’s paper also contains a full page ad from Lord Browne’s sunny, green marketing campaign with this bold headline:

Our plans for biofuels are growing.

The copy boasts of plans “to invest $500 million over the next 10 years to create the Energy Bioscience Institute, the world’s first integrated research center dedicating to applying biotechnology to the energy industry.”

$500 million sounds like a lot of money. Spread out over ten years, however, it becomes a rounding error, or perhaps an option grant for the CEO, at $50 million a year for a company that generated $32 billion in pre-tax income last year.

If the greens truly believe that, by putting up nice bright signs with green flowery buds on gas stations dispensing volatile fuels to feed combustible engines that have probably already rendered the planet fatally wounded an oil company can become some sort of environmentally “friendly” business, then we are in even worse trouble than anybody—including Stephen Hawking—could imagine.

Jeff Matthews
I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


quints said...

There's another way to look at it. Once the oil is out of the ground and burned up, we won't be able to do further damage. Companies like BP are accelerating our progress down that path. If the oil is there, no matter where it is, or what other technologies become available, it will be used. If we use it up now, eventually, the earth can recover.

medford1 said...

This story has been written already, its called chicken little. I was going to ask why you are running around crying the sky is falling, and then I remembered, you are a short seller.

Of course BP has pulled a fast one on the tree huggers, but the bigger joke is on the rest of us: you are a cook if you don't 'believe' in global warming. What is the saying, 'takes one to be fooled by one'?

johnokc said...

Having recently seen a proposed investment in an ethanol plant where 100% of the investors' capital was recoverable from Federal Income Tax credits, we might ask BP what their aftertax investment is.

Humbug said...

Dead-on, Jeff.

bubbles said...

You’re a typical hypocritical environmentalist complaining about big oil and the damage they’re doing to the planet not realizing they are just giving consumers a product that they demand. Just a few days ago you were whining about being in your car and stuck in traffic. You were burning up fuel going nowhere, so if you think big oil is responsible for our planet’s demise you better realize you’re an accomplice.

Howard Lindzon said...

sounds like a sweetheart to me

Aaron Koral said...

BP, a low beta stock (i.e., under 1), may not "make trees," but their dividend yield (currently 3.5%) and their forward earnings yield of 10.22% (i.e., the inverse of their forward (1 yr.) P/E ratio) sure could make a lot of "green" for its shareholders. I might, however, be mistaken, though...

sjgmoney said...

Jeff, normally I agree with your stuff but "environmentally irreplaceable areas such as northern Alaska"? Cmon!!!

What's next, we shouldn't drill in the deserts either because that sand is really usefull!!!!

Jake said...

You drive around New York City and you conflate oil companies with a desire to destroy the earth? C'mon. Get out of the car, stretch your legs and walk to the closest subway.

SirHotspur said...

50 million out of 32 billion? They are spending like .15 percent?

That would be like me making 60000 a year and publically stating that I am going help further the relief efforts in Somalia...

"So I am honored to present this check for $120.00!!"

Jeff said...


You forget that burning the rest of the oil also puts excessive amounts of Carbon Dioxide and other pollutants into our air and water. We should be trying to slow and stop global warming and climate change, not facilitate its advancement.

Unfortunately, it is the free market which determines our fate. We will not make the needed transition until gas and oil become more expensive than renewable energy.

burbed said...

>>We will not make the needed transition until gas and oil become more expensive than renewable energy.

Ah... Peak Oil.

At that point, we won't have any food to eat since all of our edible food comes from South America.

Unless you like eating soybeans and corn all day I guess.

the management said...

This is pretty spot-on, Jeff, but "Vanity Fair" also carries a pretty big clue in its name about whether it's a serious newsletter of the ecological movement of a largely worthless magazine about celebrities.

Dan said...

Although you're correct to call out BP for perhaps doing as much or more marketing of how environmentally-friendly they are as opposed to actually getting out of the oil business, I think this misses the point a bit. For those of us who need to use cars presently, which is 99% of us, you could ask yourself if you prefer getting your atmosphere-destroying fix from a company that denies global warming is a problem, or a company that at least acknowledges the issue and does something about it, however small a dent it makes in their bottom line. Kind of a lesser of two evils thing.

namazu said...

Environmentalism aside, I wonder if we have enough data to backtest a "Davos indicator" along the lines of the old Business Week cover indicator--predicated on the idea that CEO time spent Thinking Big Thoughts or social climbing at the World Economic Forum is CEO time not spent minding the store.

jdpynch said...

It is the goal of companies to generate a return for their shareholders. TURN OFF YOUR COMPUTERS....SAVE THE PLANET