Wednesday, June 09, 2010

lucrative externalities....,

Guardian | The oil firms' profits ignore the real costs. The energy industry has long dumped its damage and, like the banks, made scant provision against disaster. Time to pay up. Has BP ever made a profit? The question looks daft. The oil company posted profits of $26bn last year. There's no doubt that BP has been pumping money into the pockets of its shareholders. The question is whether this money is what the company says it is. BP calls it profit. I call it the provision the firm should be making against future liabilities.

Despite an angry letter from two US senators and a warning from Barack Obama about spending big money on their shareholders while nickel-and-diming coastal people, despite the fact that it has no idea what its total liabilities in the Gulf of Mexico will be, BP seems to be planning to pay a dividend this year. It's likely to amount to more than $10bn. As the two senators noted, by moving money "off the company's books and into investors' pockets", BP "will make it much more difficult to repay the US government and American communities".

Pollution has been defined as a resource in the wrong place. That's also a pretty good description of the company's profits. The great plumes of money that have been bursting out of the company's accounts every year are not BP's to give away. They consist, in part or in whole, of the externalised costs the company has failed to pay, and which the rest of society must carry.

Does this sound familiar? In the 10 years preceding the crash, the banks posted and disposed of stupendous profits. When their risky ventures failed, they discovered that they hadn't made sufficient provision against future costs, and had to go begging from the state. They had classified their annual surplus as profit and given it to their investors and staff long before it was safe to do so.