Climate Bills and a Green Economy

The Oil Spill: The Crisis That Will Not Go to Waste

June 15, 2010

Neal Boortz - Top billing for today's headlines is the Gulf oil spill. Two big deals today: We'll have a hearing in Washington with all the big oil companies; and The Community Organizer will be addressing the nation tonight about the oil spill.

During His Excellency's speech Obama is expected to push for a "comprehensive energy bill." There you go folks: The "never let a good crisis go to waste" mindset in action. Make no mistake, when the Democrats use the word "comprehensive" it is simply a euphemism for piling anything and everything they have ever wanted to implement that has any remote connection with anything dealing with either the production or the use of energy into one bill. This bill will be so large that it will be hard for anyone to read through it in its entirety .. with the exception of Jamie Dupree of course.

Not only that, but the great unwashed (that's those of use who don't work for government) will only have a short amount of time in which to read this mess because Barack Obama will label this as a "crisis" - something that can't wait and needs to be passed immediately! After all, Obama is now on record as comparing this oil spill to 9/11.

Hold on a second ... let's address this 9/11 thing. Obama wants us to believe that an accident in the gulf resulting in the release of huge amounts of the oil into the Gulf is somehow comparable to the deliberate murder of 3000 Americans by Islamic fanatics? Am I missing something here? Are there cells of oil company workers out there who are threatening to cause even more explosions, sink more drilling rigs and release more oil? Does our pathetic president really want to stick with this 9/11 comparison?

But back to BP. One of the ideas floating around in Washington right now is to force BP to suspend its dividend payouts, which was $10 billion last year, and set up an escrow account to pay for any damages and cleanup. Democrats particularly prefer this scenario. Democrats ... the people who see shareholders as second-class citizens in the wake of this crisis. For example, Rep. Ed Markey has decided who he believes should be receiving revenue from BP:

"I think we have to put the victims at the top of the list and the shareholders and the bondholders down below them. And I don't think there will be any debate about that. And if there is a shareholder that actually holds that position, then if you kick them in the heart, you break your toe. It is there company, they invested in it and unfortunately they did so not in good times, but in as bad times as well."

Talk like this really has the British upset. Truly. There is a quiet international brouhaha happening here that the Obama administration is trying to keep on the hush-hush. You see, these dividends that American politicians are calling to suspend happen to be the longtime favorite investment choice for British pension funds. BP's dividend payments accounted for 13% of all dividends handed out by British companies last year. So the demonization of BP and its shareholders has a lot of Europeans, particularly in Britain, upset with Obama and America. It seems as though Obama enjoyed popular ratings abroad, until he decided to assault their piggy bank.

Something else ... think for a moment about our wonderful federal government seizing these funds from BP and then handing them out to victims --- or alleged victims - of the spill. Does our government really have a good track record on things like this? How many stories do you remember which detailed government incompetence in handing out money after a disaster? Whenever the government declares a disaster area and starts handing out checks it is only a matter of time before you start getting the stories of fraud and abuse.

Why does the government want to hand out this money? Simple: Because the people who get the money are going to have warm and fuzzy thoughts about the people they got the money from. Politicians are not interested in seeing BP make any moves to improve its image with the victims of the oil spill. Here are two possible statements you might hear from a spill victim one year from now:

• * "Yeah, BP caused the spill. But at least they stepped forward and compensated us for our losses."


• "Yeah, BP caused the spill. And if the government hadn't seized their assets and handed them out to us we would still be suffering.

Come on folks. Is there really any question as to which way the political class would want to go on that one? This is nothing less than the creation of a political slush fund to benefit politicians by making them, not BP, look like the source of needed funds in the wake of the oil mess.

BP is claiming that it has the financial capability to pay for the oil spill cleanup, maintain its dividends and not go bankrupt. Yesterday I had a caller on the air who said that he hoped that BP went bankrupt after paying for all of the cleanup for this oil spill, yet he couldn't tell me anything about the financial viability of BP. Nothing. So since BP and this oil spill aren't going to go away any time soon, I've created a little cheat sheet based on information from the New York Times for all of you who want to call up and speak intelligently on the subject.

• In 2009 BP had a net income of $6 billion. For those of you who are government educated, a net income would be whatever is left over after you subtract all expenses and loses from your total revenue. In 2009, BP posted a $17 billion profit.


• In 2009 BP produced 63 billion barrels of oil world-wide; 18 billion in reserves.


• Last year, BP's operating cash flow - this is the difference in the amount of cash BP paid to suppliers compared to the amount of cash generated from customers - was $27.7 billion. Of that money, $22 billion was spent on exploration and development.


• By the end of last year, BP had a debt of $26 billion, giving it a debt-to-equity ratio of 20%. This would be the proportion of shareholders' equity and debt used to finance a company's assets. In regards to its financial flexibility, the company says it could raise that ratio to 30% and still be viable. While this is not an apples-to-apples comparison, the United States is on track to hit a 94% debt to GDP ratio by next year.

One last little tidbit on this BP subject. Another idea floating around Washington is that BP should pay the salaries of workers affected by the government's 6-month drilling moratorium. A moratorium which, by the way, was NOT recommended by experts, even though the White House will claim otherwise. (Obama lied to us on this one. Big surprise) We are talking the salaries of 15,000 to 20,000 workers, which would raise BP's liabilities by another $1 billion or more.

Sorry ... there is no way the federal government, especially a federal government being run by an anti-capitalist incompetent like Barack Obama, should be allowed to order a bunch of people out of their workplaces on the one hand, and then demand that some other private entity cover their salaries while they're not working. This is something that, if it is going to happen at all, happens through legal action.