26 November 2014

Gary Wright

Gary Wright - BISS Research

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MiFID

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Oil companies sit and fiddle whilst the global economy burns

30 October 2008  |  3414 views  |  0

The announcement that BP's third quarter profits have exceeded £6billion has to be a worry for governments and just about everyone on the planet. In these times of economic worry and with the financial markets in turmoil such figures have to be embarrassment for the board of BP. In turn all the other oil companies are likely to show similar impressive results and no doubt they will be similarly sheepish to BP in their announcement.

The problem for us all is; how you can bring greater social responsibility into the boardroom of Oil, Gas and Water companies, without governments intervening? The strength of any economy is to operate a free market which can find its own level, through competition, improve customer services and maintain competitive prices.

The problem with commercial companies in the utilities sector is they all have a common target in its customer base (You and me) and that by its very design leaves virtually no choice of supplier. The problem is that each utility can act as a cartel even if they never meet. BP will watch the other Oil companies and price accordingly on the forecourt. Although BP is quick to point out they do not make their profits from the retailing of petrol but in other areas. They also make heavy play of the governments reaping of taxes from a litre of petrol.

All this is true of course but it does pose the question that if Oil companies are making so much profit from other activities, why do they feel the need to increase petrol prices when the OPEC cartel increase their prices? Surely social responsibility comes into play where cross subsidies within BP make sense. The last thing any commercial firm wants is a recession and the huge profits being made increase the inflationary pressure and decrease the ability of the consumer to keep up with the rising. It's a bit like killing the fatted calf.   

No one wants draconian measures, legislation or fiscal sanctions to be levied that will ultimately destroy the free market. But unless the utility companies begin to act more socially responsible, they may find their days are numbered, as the world will not be held to ransom and alternative methods of recovering any unnecessary overpricing pricing will be found. Perhaps a global agreement by all governments that they will cap petrol prices to protect the larger global economy. A kind of Petrol OPEC!

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name

Gary Wright

job title

Analyst

company name

BISS Research

member since

2007

location

London

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CEO of B.I.S.S. Research, founder of the BISS Independent Accreditation for all systems and servi...

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