07-5-07 by dugan
Someone recently asked me why Shell sold its
mega-profitable Southern California refinery to the refining company
Tesoro. Umm, I dunno, was my brilliant reply. Today, there’s a
blazingly obvious answer, but it’s strictly a rumor.
A published but unsourced report
in London says Britain’s BP and the Dutch-based Shell are reviving old
merger talks. There’s been no more reporting on it, which makes me
wonder if it’s true. But the consequences are worth thinking about.
The combined company would, in market capitalization, match Exxon,
removing any remaining pretense of a competitive market in the
integrated oil and gas business.
As for that former Shell refinery in Wilmington, Ca., BP owns an even
larger Southern California refinery, which it inherited when it bought
ARCO in 2000. A merged Shell-BP would have been the Genghis Khan of
gasoline in Southern California, free to loot and plunder. Too much for
even laissez-faire regulators to swallow.
Even with the Southern California refinery issue moot, such a merger is still an anti-trust nightmare.
Somewhere in the begats
of the oil mergers of 1998 to 2002, regulators should have called a
halt. But once BP, Amoco and Arco became one, and Exxon married Mobil,
who was to stop Chevron and Texaco? Or Conoco and Phillips? By the time
Chevron ate Unocal, the smaller company was just a snack.
As with every previous merger, the companies and their allies will
argue about the "efficiency" of a merged company, about "global
competititiveness." They’ll quote alarming speculation that Shell could
otherwise be taken over by the Russians. They’ll argue that BP and
Shell plan to split the new company into separate oil-drilling and
refining entities, so it’s not really a merger.
But with gasoline at $3, and recently up to $3.50, we can all see
what "efficiency" hath wrought. Exxon, Chevron and their brethren spend
more of their combined $120-billion annual profit on buying back their
own stock than on exploration and development. Renewable fuels are a
laughable asterisk on the annual report.
"Efficiency" means the safety cutbacks that killed 15 workers at
BP’s Texas City refinery, post-mergers. And remember last year’s Alaska
pipeline spills and shutdowns. ExxonMobil still hasn’t paid up for the
Exxon Valdez disaster. Chevron is still stiffing Ecuadoran peasants
whose water and land Texaco ruined.
If this rumor turns out to be true, OilWatchdog will have some "take action" plans.