It was way back in 1911 that oil met its Armageddon in the form of trust-busting legislation in the US designed to destroy the world of John D Rockefeller and his Standard Oil Trust. The result was the creation of some of today’s biggest oil businesses, including ExxonMobil and Chevron.
Today, these “sons of John D” are themselves feeling the first chill winds that blow when you become too successful (tall poppy syndrome), or are perceived as not acting in the public interest (conspirator syndrome).
Until the past few days, The Slug thought that most of the criticism being hurled at big oil was standard political stuff. After all, politicians love to be seen batting for the little guy, sympathising with his plight as he tries to pay for the next tank of gas (while being driven home in a government limo), and hauling big oil execs before an official inquiry (and then playing golf and lunching with the same guys).
But last week something changed. While cruising through the back-blocks of the media world The Slug came across a fascinating story out of Washington about a “small oil” lobby group heading off in a different direction to big oil.
According to the US report, the Independent Petroleum Association of America is “distancing itself” from the oil majors when it comes to dealing with government.
The aim is said to be all about winning funding to pay for an expanded exploration and production effort, with the small companies saying they lack the firepower of big oil which is basking in windfall profits.
At first, this seems to be a perfectly normal stance. Big oil is making obscene profits and quite obviously hasn’t got a clue about what to do with the loot. Over the past two years, for example, it has been calculated that around $200 billion has been returned to shareholders in the form of dividends and share buybacks. ExxonMobil alone is said to be returning around $3 billion a month.
For politicians, the sight of investors getting windfall payments from those windfall profits when Joe Voter is being stung at the pump is almost too much to bear. Hence we have inquiries into profit levels – and now we have the curious sight of the small oil companies saying, 'It’s not me, your honour, it’s the big guy who’s taking all the money.'
The Slug is not sure where this is headed, but he has a theory, and he reckons that some of the chaps running the oil game share that theory and it’s all about history repeating itself.
Big oil is in grave danger of becoming too big, just as it did under John D. almost 100 years ago. No-one is saying that governments will move to break up big oil in a repeat of the 1911 experience, but there are straws blowing in the wind which hint that something might happen.
The gap small oil is seeking to open is a sign, as is the level of government criticism, plus the apparent failure of big oil to actually do something useful, such as a dramatically expanded exploration effort, with its spare cash.
Then there is the issue of oil-rich countries, especially in the Middle East, not wanting big oil in their backyard – though not having quite the same problem with small oil which is easier to push around.
It’s probably going too far but The Slug can see a day coming when big oil becomes just too damned big, too unwieldy, and with too much baggage to carry.
Perhaps, just perhaps, if government doesn’t wield the axe then management might do the job itself, creating a series of smaller, more nimble, and more politically acceptable companies that will find it easier to do business – the Grandsons of John D?
