First Oil
“Corporations are people, my friend.” – Mitt Romney, former Governor of Massachusetts People all over the world, and the mainstream news media, do not have a favorable opinion of corporations in general, and oil companies in particular. An ABC News/Washington Post poll taken April 5-8, 2012, asked “Who (sic) do you blame for the recent rise in oil and gasoline prices: other oil-producing countries, U.S. oil companies, or the Obama administration?” The U.S. oil companies received the most blame (28%), other oil-producing countries came in second (25%) and only 21% blamed the Obama administration. While there are complex reasons for the rise in oil and gasoline prices, it is apparent that the public is ever ready to blame the oil companies. I would like to present a contrarian view that corporations have been tremendous engines of growth, and deserve our thanks and encouragement. Under an equitable regulatory framework, private corporations in OECD countries and public sector corporations in the BRIC (Brazil, Russia, India and China) nations can pull us out of the recession faster and put more people to work. Creative capitalism. Corporations, stock markets and banking are the three building blocks of capitalism. People with an entrepreneurial bent (referred to by Romney) can form a corporation, raise funds through the stock markets and banks, and offer relatively risk-free employment to the masses. By selling stock, corporations can provide equity growth to their shareholders. Who owns “Big Oil”? According to research presented by Scribd.com, corporate management owns only 2.8% of stocks. The major investors are pension funds (31.2%), mutual funds (20.6%), IRAs (17.7%), individual investors (21.1%) and other institutional investors (6.6%). As such, even the owners of corporations are essentially people. The corporation business model has been so successful, that even socialist and Communist countries have formed oil and gas corporations, whose shares are traded on the international stock exchanges. Seven sisters. Since World War II, the rise of the international oil and gas business could not have occurred without the initiative of the Seven Sisters: Anglo-Persian Oil Company (now BP); Gulf Oil (acquired by Chevron), Standard Oil of California (now Chevron) Texaco (acquired by Chevron); Royal Dutch Shell; Standard Oil of New Jersey (Esso), and Standard Oil Company of New York (Socony, now Exxon Mobil). Prior to the energy crisis, the Seven Sisters controlled 85% of the world’s oil reserves. Now the name for the international oil companies (IOCs) is “Big Oil.” These companies are BP, Chevron, Exxon Mobil, Royal Dutch Shell, Total and ConocoPhillips. The Big Oil companies are active in most sectors throughout the world, in collaboration with each other, as well as local national oil companies. Lately, leading NOCs, such as Statoil, Petrobras and CNPC, have morphed into IOCs. The Perdido spar (at a record 9,627-ft ultra-deepwater depth), Sakhalin Island’s 6-mi-long extended-reach wells; and the Trans-Alaska pipeline are truly the new wonders of the world. Government as the regulator and facilitator. Since corporations are people, as we’ve emphasized, they are prone to human foibles and errors of commission and omission. Irresponsible behavior has to be checked through a fair and equitable regulatory environment. The Gulf Spill and the recent banking scandals are reinforcing the need for strict enforcement of safety, as well as securities and exchange regulations. Provided such enforcement is fair and balanced, there should still be significant economic incentives for Big Oil to continue to play its vanguard role in providing adequate fuel for a world that remains hungry for energy.
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