Archive for July 27th, 2007

BP’s Whiting refinery expansion concern highlight value of protecting reputation

July 27, 2007

Everyone is complaining about high gas prices, and many want to blame the oil companies for price gouging. More intelligent observers will note that no new refineries have been built in 30 years, that billions have been poured into existing refineries to meet ever increasing environmental regulations, that legislating all kinds of boutique fuels diminishes efficiency–all this not counting the skyrocketing cost of crude and skyrocketing demand via India and China’s rapid modernization.

So we have most major oil companies scrambling to use some of their profits to invest in refinery expansions. (NIMBYs and environmental regs won’t allow new refineries). BP has been seeking permits to expand their Whiting, Indiana refinery. That ought to be good news. More refining capacity, more product on the market, lower fuel costs. Wrong, the public is up in arms and opportunistic politicians are all over it.

This is a complicated issue with many dynamics. A couple worth noting. If the nation’s news media does not do a better job of informing the public about the costs/benefits of refinery expansion and the need to increase our ability to produce fuel products, we will have to soon accept the idea that we will be buying not only our crude from foreign sources, but our fuel products as well. As I have commented here, the industry has done a terrible job of public education. But the news media has a role to play as well and they need to step up to this challenge.

Secondly, and more to the point here, this shows the challenge of trying to do business when your public franchise has been lost or damaged. Those of us in crisis communication continue to try to make the business case for CEOs and senior leaders about the value of protecting your license to operate. I suspect that part of what is happening here is the loss of public franchise that BP  has experienced over the past couple of years.  That loss can come at a very very high price. In this case, not just to the company, but to anyone else how is trying to get a permit in the region and the entire country and globe for that matter. We are all being punished by mistakes made and by hyper-aggressive news media coverage that has demonized this company. It is time we all realize that this kind of demonization comes back to bite us all on the behind. Companies like BP owe it to all of us to do their damndest to protect their ability to operate and secure new permits. And the news media, if they were honest, would take a step back and say, you know what folks, we too have a role to play in the high prices you are paying at the pump today and tomorrow.