Why is BP in Control of Oil in the Gulf?

ByPrimary Researcher

Executive Summary

  • Why Does BP Own a Taxpayer Resource?
  • Private Industry of a Public Resource?
  • There is Not Enough Money to Pay for Entitlements!
  • The Non-Market Economy
  • The Implication of BP’s Twenty Billion Dollar Fund

Introduction

I recently was listening to a radio show which described how BP had purchased or leased most of the charter vessels in the area and have the captains sitting on the docks doing nothing. This is so members of the media cannot hire the vessels to go and document the pollution in the Gulf.

More evidence points to the fact that the Coast Guard, far from managing BP, is being managed by and is instructing BP how to enforce the media blackout.

BP has hired contractors to patrol the area and threaten to arrest members of the media who document the disaster, and the Coast Guard is threatening them with arrest if they do not comply. US military involvement is further decreasing the ability of the media to document the spill.

Why Does BP Own a Taxpayer Resource?

One should question what BP is using to buy all this influence and to pull all these strings. It is not very complicated.

  • BP has no resources aside from the oil it pulls out of the ground. It uses this to pay for all of its drilling equipment, boats, oil rigs, petroleum searching equipment, government payoffs, etc.
  • Sometimes this oil is in other countries, and sometimes it is in the US, as in the case of the Deepwater Horizon which was drilling off the coast of the US in the Gulf of Mexico. However, this is a resource that at some point belonged to the US government. The question I have, and one I think every taxpayer should ask, is why is BP in control of this resource.

If the resource originated in the hands of the US government, why does the US government not simply hire firms to extract, refine and sell the oil but maintain ownership of the oil?

What appears most likely is that the rights to the oil were sold to BP at a very low price. This means that the original owners of the oil, being the US government is essentially giving what is US taxpayer property away. It is given to large multinational governments, who then, resell the oil back to the citizens and keep immense amounts of money for themselves. This is must be what is meant by the term “private industry.”

The above graphic is a map shows the world’s proven oil reserves. Companies like BP, Shell Oil, Exxon Mobile, etc.. corrupt governments into handing over oil reserves in an undemocratic way through bribery. It puts them in control of a resource that they have no other claim towards. 

Furthermore, looking at the reserves map, and seeing the reserves of Saudia Arabia, Iraq, Iran and the UAE goes a long way to explaining US foreign policy.

Private Industry of a Public Resource?

However, it isn’t, because its based upon first stealing a public resource, and then claiming property rights to it. Now the Heritage Foundation, Fox News, and the Hoover Institute would propose that without BP and Shell and Exxon, there would be no profit motive, and oil would not be brought to the US population.

This, however, is completely false.

The US government can hire any oil company to extract, transport and sell the oil, and provide a fair value for these services, without actually transferring the ownership of the oil to these companies. The US could then decide the rate at which to sell this taxpayer resource to the taxpayers in a way consistent with its energy policy. Selling the oil at simply the price of extraction, refining, and transportation would encourage the overuse of the resource, and the large SUV’s that American’s currently drive would get even bigger. However, the proceeds from the sale, and the difference between the sale price and the price necessary to pay firms like BP and Shell.

Tthe proceeds from the sale, and the difference between the sale price and the price necessary to pay firms like BP and Shell, should go into the US Treasury. The US government must tax income at the rate that it does because it refuses to receive a fair or market compensation for its resources. Those resources are very close to given away to elite interests. These elite interests have zero interest in paying a fair level of compensation to the government. In fact, the massive profits of oil companies are due in great part to the oil companies not paying very much money to obtain the oil rights.

There is Not Enough Money to Pay for Entitlements!

We keep hearing how there is not enough money for this program or that program. However, there is plenty of money if the US would cease selling out the interests of the citizens to firms like BP, Chevron, Shell Oil, etc. In case anyone has any consideration for the credibility of these firms, just look at what BP has done to the Gulf, or what Shell Oil has done to Nigeria.

The Non-Market Economy

The giving away of a public resource to private firms and allowing them to charge what they like is another example of how little the US economy resembles a market economy. In an actual market economy which respected property rights, the owners of a resource (the US government) would control the asset (the oil), and simply use firms like BP as subcontractors. What BP is essentially doing is stealing the private property of US taxpayers and then booking the difference as “corporate revenues.” They do this by buying lobbyists who the buy politicians to sell out the public interest for private gain. In principle, none of these companies should take possession of the resource, because it is not theirs to take.

The Implication of BP’s Twenty Billion Dollar Fund

Much has been made of the 20 billion dollar fund BP has setup to deal with consequences of the Deepwater Horizon spill. Firstly, it’s not $20 billion; it is various payments over time that end up combined as $20 billion but are not, in fact, $20 billion in present value. Secondly, the negative externalities of the spill are much larger than $20 billion. So HP is still placing tremendous costs on society with its $20 billion fund. However, at another level, the shall we say $10 billion BP is setting up in this fund, never should have been on BP’s books in the first place. Their primary asset is oil, which was already owned by American taxpayers.

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Conclusion

What the oil companies like BP and others are bringing to the party is the knowledge of exploration, refining, and transportation. All of these things can be hired out. It makes little sense to allow oil or mining companies to buy natural resources at very low prices, so they can sell back what is US taxpayer property to the US taxpayers. The natural resources of a country are not the property of any private company, or at least should not be. The original mineral rights reside with the state. Thus, they are the property of the people who are citizens of that country. The US is like other countries where the oil companies take as much ownership of the oil that the country allows. In the case of some countries, less that 25% goes to the government of the country.

We should not be surprised by BP’s imperial handling of the spill. Their entire business model is based upon theft. The only time they see the US taxpayer owning the oil that is their right is when they have spilled it as pollution into the Gulf.

References

https://www.newsweek.com/2010/05/26/the-missing-oil-spill-photos.html

https://news.yahoo.com/s/ap/20100617/ap_on_bi_ge/us_bp_s_future

https://www.mnn.com/green-tech/research-innovations/blogs/gulf-media-blackout-triggers-journalist-fury