A memo to would-be BP boycotters

Hello out there, blog readers. I know you're upset about the oil spill in the Gulf of Mexico, and think that boycotting BP is a kick-ass way to do something about it. Today I'm going to do three things: first, I'm going to point out why your idea is stupid. Second, I'm going to point out why your idea won't work. Third, and most importantly, I'm going to tell you how the oil industry actually works.

Part 1: Why your idea is stupid.

"Those bastards," you think. "They need to be punished. I should never buy any gas from BP again." Well, that's stupid. For all you left-wingers out there, boycotting BP is stupid because remember how BP is responsible for all the costs of the clean-up? Well, BP needs to be an ongoing concern if you're going to extort the maximum amount of money from them. Otherwise they can't pay. At a minimum, they need to stay alive just long enough to extract the maximum amount of money possible. I'm thinking 10 years.

For any right-wingers who might be thinking that a boycott is the way to go, consider this: BP employs a shit-load of Americans. We need as many employed Americans as possible. Let's be outraged on our own time. Your fellow Americans need to get paid.

Semi-unrelated point: remember a few years ago when gas prices were really high, and someone said hey, if no one bought gas for one day, all oil companies would lower gas prices! Remember how well that worked?

Part 2: Why your idea won't work.

So you think that not buying gas at your local BP station is going to hurt BP the company. So you roll past the BP station, and pull into the local am/pm convenience store and fill up and buy a soda. Bad news: you just bought gas at a station that sells BP gas. They just call it something else. If you're seriously going to boycott a company, you have to research all the wholly- and partially-owned subsidiaries and boycott them too. Most boycott-types don't have that kind of attention span.

Anyone that flies is probably going to ride on a jet that's fueled by BP aviation fuel at some point. You don't choose who supplies an airport with av-gas. And if you call airports and airlines and request that they not use BP av-gas, they're going to tell you that you're nuts. They don't want to increase their fuel costs, and refusing to patronize one of the major industry players is certainly going to increase costs. (Economics: same demand for a smaller supply = higher costs.)

Part 3: How the oil industry works.

If you think not going to a BP branded gas station is going to hurt BP, you don't understand how the oil industry works. Here's a primer from a guy who's seen it from the inside. Or, from the outside, but really close to the inside, looking inside.

A) Extraction. The first step in making gasoline is extracting crude oil. There are a lot of companies that do this - there are big names like Chevron, Shell, and BP, but there's also smaller players. Like in 'There Will be Blood', you can have family-owned oil producers.

Here's an interesting fact: the cost to extract crude oil from the ground (or ocean floor) is the largest single factor that determines the price you pay at the pump. Interesting corollary: when the price of crude oil goes up, domestic oil exploration and drilling increases. That's because oil fields which were previously too expensive to drill (either because of the types of equipment needed, or because of the rate of production, or both) are suddenly affordable. So when the price of oil went way up a few years ago, I wasn't pleased about what I was paying at the pump, but suddenly I had family members making good money working in the oil business.

B) Refining. At the refinery, oil is turned from crude into gasoline. Refineries are typically owned by a big oil company: your Chevrons, Shells, BP, Citgo, Valero, etc. Refiners buy crude oil from producers. Interesting fact about refineries: you can't just take any crude oil, put it in any refinery, and expect gasoline to come out the other end. Each refinery is built to process a specific kind of crude oil, whether it's light sweet crude from West Texas, or nasty tarry shit. So let's say this moratorium on new Gulf of Mexico drilling goes through. There will be refineries up and down the coast that will cut back their production because they don't have sufficient input. And the odds are that there isn't a good replacement product that can be purchased, at least not on short order.

So, to recap thus far, let's say that Pa Kettle Drillers has produced oil from one of their fields, and sold it to a Valero-owned refinery. Valero takes the crude and creates, among other things, raw gasoline.

A word about raw gasoline. In a perfect / sane world, every refinery's output of raw gasoline would be chemically identical to every other refinery's output. Unfortunately, we live in a world (or at least a country) where some states (cough, cough, California) can determine that the fuel sold in their state needs to have special formulations. Which sounds great unless you live in Needles, California. When you buy gas in Needles, it's gas that was trucked in from Los Angeles at great expense (which jacks up the price at the pump). If California didn't have their own crazy rules, that gas could be trucked in from a terminal in Las Vegas for a lot less money.

C) The Terminal. The refinery produces raw gasoline. I saw "raw" because you would not want to put that shit in your car. At least not if you like your car. No, the stuff we think of as gasoline has been massaged so that it burns cleaner and leaves less gunk in your car. Wherever gas companies (Chevron, Shell, etc.) want to move their branded product, they own a terminal facility. At the terminal they receive shipments of raw gasoline from refiners, and add in detergents, Techron, what have you, to make it their own unique product. The terminal stage is the one part of the fuel chain where you can be sure that a particular gas company is involved. So if you're buying gas at a Chevron station, the only place in the food chain that you can guarantee Chevron was involved is in the adding of detergents to raw gasoline at their terminal.

Taking our example out another step, Pa Kettle drills the oil, Valero refines it, and then sells the raw gas to BP. BP transports the gas to their terminal, where they add in their proprietary ingredients to make it BP-brand gasoline.

D) Transportation. You don't have a fuel terminal in every town - one terminal can serve a large area. So, any gas station that's going to be supplied by that terminal has to get their gas trucked in. Some gas station owners have their own trucks (these are known as jobbers). They send out their trucks to the terminal, fill 'em up, and drive them to the gas station to unload. Other gas station owners contract with third party delivery services to bring the fuel to them (these are known as shippers). It is very rare that a truck owned by the gas company would take gas out to their branded stations. VERY rare.

Let's extend out example yet again. Pa Kettle's crude gets fed into the Valero refinery, which gets delivered  to the BP terminal, where it is processed. Jimmy's Shipping Company picks up the gas for delivery to a gas station.

E) The Gas Station. Most gas stations in the US are not owned by the company whose flag they fly. There are a few reasons for this. One is that gas companies, by and large, don't know shit about running a convenience store. Another reason is that gas companies usually decide that their capital dollars are better spent on their core business (extracting and refining oil) rather than selling it. So, your average gas station is going to be owned by a small business owner, often what I like to call a New American. Let's call him Nigel.

Now, this is not to say that oil companies never own convenience stores. When a company wants to extend its presence in an area, they will often build and run new gas stations to do just that. After a while, though, they'll decide they want to cash out, and they will sell the station. One possible caveat is gas stations near that company's corporate headquarters. Chevron stations near San Ramon, CA (Chevron's US HQ) will probably always be company-owned. It's more of a vanity thing than a business necessity, because convenience stores run on very slim margins. Gas companies make all their money on upstream (producing & refining) and hope to break even on downstream (retail sales).

One last time, let's take a look at our example. Pa Kettle's crude gets fed into the Valero refinery, which gets delivered  to the BP terminal, where it is processed. Jimmy's Shipping Company picks up the gas for delivery to a gas station owned by Nigel.

Now, that gas station may have a BP logo on it, but the only time BP got involved in the entire life of the gasoline that is sold at that station is when they added detergents to the raw gasoline. That's not a high-margin business. The big money is selling the crude to the refinery.

This is not to say that BP does not produce or refine oil. They definitely do. What I want every would-be boycotter to realize is that when they decide not to buy gas from the local BP station, the impact on BP is infinitesimal. The only person you're really hurting is Nigel. Let's say your boycott works, and all the BP-branded stations in your area shut down or switch to other brands. The gas they sell has to come from somewhere, so everyone in the production chain stays in business except Nigel.

Let's say that you live in an area where there is a BP refinery. Well, bad news, because no matter whose gas you buy (Chevron, Shell, etc.) it all comes from the same refinery.

My point? The only people your boycott hurts are the small business owners who run BP-branded gas stations. And if you say well, that's too bad, they're unintended casualties in a holy war, then you're an asshole, because as noted above, your crusade isn't even hurting BP.

Really want to stick it to BP? Go buy a shrimping boat in southern Louisiana at a discount, then file with BP to get financial assistance because they've ruined your livelihood.

Well, I hope this has been as much fun to read as it was to write. I'm a few drinks in and using Mrs. Bart's tiny computer, so I'll correct any spelling errors later. 

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