Wednesday, August 09, 2006

BP. We're being "Piped" - not "Hosed"

All this time I thought the Oil Companies were hosing me. Now I realize I was being "piped" all along.

This BP Prudhoe Bay pipeline thing, has me all worked up. BP just released company numbers showing a $54 Billion profit. At the same time it was disclosed they spent right at $1 Billion for repair & upkeep of their facilities. Now, were being told gasoline will skyrocket in price.

The pipeline in question is 16 miles long. That may seem like an engineering hurdle to jump over, but if BP threw dollars at the problem - It'd be repaired in days. Days. Why isn't BP moving mountains to correct the situation? The answer lies in math. Really simple math.

As it turns out, the oil business is the only business that can instantly pass on the cost of doing business to customers in real time. BP oil from elsewhere will fetch a higher price - and the bottom line is well - the same.

Let's say you run a Dairy Queen. You serve a hot fudge sundae containing a cockroach to a woman. She sues. You lose $10 million. Do you raise the cost of soft serve? Of course not. It's the cost of doing business.

Your coffee machine company vice-president is sued for lewd behavior. You lose $30 million. While it will be a pain in the pocketbook - coffee makers will not jump in price.

You're State Farm. You are obligated to pay billions in hurricane damage claims. You can't just raise rates - uuhh - OK, I got this wrong. The Insurance business is the only business that can hose customers as badly as oil companies - and they do it without a single pipe.

Throw 'em all in jail. Every oil executive and insurance man on the planet. It felt good just typing that.