If you’ll excuse another in a whole bunch of posts about oil in the last week or so, the BP oil spill has highlighted another, seldom noticed side to our oil addiction – the financial one. There is an increasing recognition of our oil dependency when it comes to transport, food, or consumer goods. But quite aside from their products, we are also dependent on the oil companies themselves.
As Andrew Simms pointed out this week in his monthly column, £1 in every £4 paid out to shareholders in the UK is from the oil and gas sector, which in the UK is made up almost entirely of BP and Shell. BP’s dividend payments are massive and reliable, which means plenty of people consider them a sound investment. Pension funds are so heavily invested that £1 out of every £7 they receive is from BP.
That’s understandable. With revenues of $239 billion last year, BP is a giant company. If it were a country, it would come 34th in the rich list. It represents an economic entity larger than the whole of Ireland, Finland, or twice the size of New Zealand. It can afford to pay out a dividend of $10 billion a year.
However big it is, BP is still vulnerable. As it struggles to control the Gulf oil spill and investigations begin, its future is suddenly looking a little shaky. The company has lost almost a third of its value since the oil spill began, and today saw its credit rating downgraded. If it succeeds in containing the rush of oil from the seabed, it will survive. If it can’t, or if the cost of cleanup operations and corporate fines comes in too high, it may not survive as a company.
That will leave a considerable hole in our pension funds. It will also impact the government. As a British company, BP pay tax in the UK – a considerable £6 billion a year. That’s roughly our aid budget, or the cost of running the UK’s law courts for a year. It’s equivalent to the whole of the first round of cuts announced last week. If BP fails, that’s very bad news for the UK’s deficit.
So here we are with an industry that pollutes on an unimaginable scale, that benefits from wars and props up dictatorships, whose product is the leading cause of climate change – and without them, we cannot run a government or fund our retirements.
The Earthbound Report 
Although I personally wish this oil spill stands as a telling example of how important it is for oil firms to keep our environment clean, I doubt the firm will be allowed to crumble because the British govt. has already pledged support for the firm.