Wednesday, August 09, 2006
Refineries and gas stations that are not well stocked rush to buy when there’s a sudden shortage, provoking an immediate price increase. Meanwhile, BP and the other oil companies that share in the Prudhoe Bay oil field stand to lose more from the shutdown than they will reap from a spike in prices.Dow Jones Market Watch agrees that BP's profits will take, well, some hit from the pipeline shutdown:
As a result Credit Suisse reduced BP's earnings-per-share forecast for 2006 to $1.08 per share, down 1.7% from $1.10 per share, assuming that the production losses continue until the end of the year. Credit Suisse said in a note that it has in turn reduced its 2007 EPS forecast by 0.2% and its 2008 forecast by a further 0.3%.Doesn't sound like much of a hit. Meanwhile, the Vermont governor obviously had his syrup yesterday morning:
A.G. Edwards, the worldwide brokerage firm, estimated that the shutdown would translate into a drop in earnings of 5% or $0.90 a share in the third quarter.
But both A.G. Edwards and Citigroup reiterated their buy ratings on BP, saying the Prudhoe shutdown won't affect the company's fundamentals. Credit Suisse said it keeps its neutral rating on the company.
It is absurd that at a time of record oil profits BP has had to shut down the nation’s largest oil field due to poor maintenance, corrosion and a leak in the pipeline. BP’s carelessness is responsible for substantial, and entirely unnecessary, increases in the price of fuel.Yes: investigate! Ed Markey is on the case:
When companies earn record profits, they have a fundamental obligation to invest in and maintain safe and effective infrastructure. It’s quite clear that this infrastructure failure could have been prevented.
Their failure to properly maintain this system suggests a near total disregard for the prices Vermonters, and all Americans, are struggling to pay to fuel their cars and heat their homes.
This situation, and its impact on prices, also further underscores the need for America to seek alternative fuel sources and reduce its dependence on oil.
Congress should immediately investigate this carelessness and take action to protect American consumers from further indifference by BP and other oil companies.
Democrats in Congress asked the U.S. House of Representatives Monday to hold hearings into BP’s Alaska oil operation following the shut down of the pipeline over the weekend. A second rupture at Prudhoe Bay will prevent 400,000 barrels of oil a day from reaching the United States until the pipeline is operational again.More from Markey:
Rep. Edward Markey, who serves on the House Energy and Commerce Committee, said the shut down reflects upon BP’s poor mismanagement of its U.S. operations and pointed out that the company has made more than enough money to prevent any problems, according to Reuters.
Because Congress is on recess, any hearings on the matter will not take place until lawmakers return to Washington in early September.
“Today’s shutdown of BP’s eastern operating on the North Slope field appears to be the result of the chronic mismanagement of its drilling operations in the U.S.,” said Rep. Edward J. Markey, a senior Member of the Energy and Commerce and Resources Committees, who questioned Department of Transportation officials about an earlier BP spill of 267,000 gallons of oil from Prudhoe Bay.I for one am particularly curious about whether the Times's confidence that "there's nothing necessarily predatory about what's going on" is warranted. Will BP's profits actually drop, or will its pipeline repair costs actually be offset (or more) by gains reaped from higher gas prices (driven up in part by the shutdown), as Greg Palast suggests? Will evidence surface that BP neglected pipeline maintenance with this purpose in mind? Will this shutdown turn out to be BP's version of the "Grandma Millie" strategy? I hate to sound suspicious, but frankly, after almost six years under Bush-Cheney rule, if you're not suspicious, you're not paying attention.
“We learned from the Transportation Department in March, after the largest oil spill in the history of the North Slope, that BP had not cleaned many of its pipelines for years. In contrast, other pipelines up on the North Slope are cleaned every few weeks.”
“While BP’s negligence is deplorable, those charged with the oversight of these pipelines must also be given the full powers needed to do their job. The Department of Transportation needs to be given clear legal authority to implement minimum maintenance standards so that these shutdowns are avoided,” continued Rep. Markey. "Agency officials testified to the Subcommittee that they needed such authority, but Congress has not yet approved legislation to give them the full oversight and enforcement powers needed."
Markey said, “With oil above $70 per barrel and BP making record profits, it can afford to properly clean and maintain its pipelines. This sudden loss of production will dramatically increase oil prices and the American people will be footing the bill for this combined failure of DOT's regulatory oversight and BP’s corporate responsibility.”
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