One On One With BP CEO John Browne
Thursday, June 15, 2006SUSIE GHARIB: Fed Chairman Bernanke cautioned in his Chicago speech today that high energy prices are likely to be relatively long lasting and could prompt consumers to cut back spending. But others in the energy industry are more optimistic. Washington bureau chief Darren Gersh talked with BP CEO John Browne this morning, and began by asking if oil prices have stabilized in the $60-to-$70 range.
JOHN BROWNE, CEO, BP: It`s impossible to forecast the price of oil. After all, 24 months ago, we were trading in a range of around $30 a barrel so this is pretty new. What`s clear is people are worried about the future. Anxiety is driving the price and they`re concerned about supply falling over in various parts of the world and as long as that anxiety exists, I think the price of oil will stay pretty high in this sort of trading range. But it could change because after all, there is quite a lot of oil around. Inventories are high and demand is within normal ranges.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, one of the key issues out there is spare capacity which is very tight right now. You`re optimistic that spare capacity will increase, but Alan Greenspan, the former Fed chairman, was telling Congress that the national oil companies aren`t investing in spare capacity, the kinds of things that will increase spare capacity. So who`s right?
BROWNE: We`ll only know when it happens and it`s all a matter of time scale, of course. It`s very important to get a close estimate of when this will happen for policymakers. But actually you can`t estimate it too closely. I do think that spare capacity will rise, because as I go around the world, I see not only the private sector, people like us, investing. We`re investing enormously heavily, but also the state oil companies. And they`re having -- they`ve got plans and they`re being executed. And so I can see even aiming off some of the statements people are making, that we will build spare capacity back to normal historical levels probably around the decade, end of the decade or so. I wouldn`t want to suggest we should be falsely complacent. But equally I wouldn`t suggest we should be alarmist, either.
GERSH: Well, let me ask you about your profit, which some people are alarmed about. It`s about $20 billion a year. What do you plan to do with it and how will you use it to find reserves?
BROWNE: Well, like all profits, they don`t belong to the company. They belong to shareholders. And I think that`s the first point I always make to people. And the second thing we think about is, you know, the price of oil`s high and it may not stay high forever. So we say there`s a certain amount of our profit that really is one-time profit. One-time profit and that certainly all goes back to the shareholders immediately. Then we look at what we do in the base of the company and we invest for the future. So we`re investing around about $17 billion a year. That sounds... It`s a tremendous amount of money and that continues to grow, in exploration or production, in refineries, in R&D, right around the world.
GERSH: Let me ask you this. Americans are getting in our cars, we`re going to be driving a lot. Are Americans going to see any relief from roughly $3 a gallon gasoline any time soon?
BROWNE: It would give me the greatest of pleasure if I could say absolutely that`s going to happen, because this is important to everybody. If I`m not just in America but globally it`s important how much of a household income is spent on transportation and heating and cooling. What I would say is this. Oil is a commodity and history does suggest that commodities have cyclical prices. When they go up, they come down. Predicting precisely when and to what level is impossible. But you can see things happening today that might indicate that the price will come down. People aren`t consuming quite as much oil as they might otherwise have done. There are new substitutes for crude oil and gas such as biofuels. There are new ways of thinking about energy efficiency, certainly, for example, in Europe. And there are fewer uses of oil other than for transportation. So this says that the great hidden hand of economics works. Something will happen. The only problem I have is giving you a precise date which this will happen. But I think it will be prudent to think that the price of oil might welcome down.
GERSH: Thank you very much. John Browne, BP CEO. Thank you for your time.
BROWNE: Thank you.
