The hugely strident approach of the America administration – and now particularly Obama – may come back to haunt them (and all of us) but how could that be?
Well, it is a matter of fact that the attacks on BP have caused its share price to crash, and while this has serious implications for most of us on both sides of the Atlantic because of the pension fund implications, the real impact could be hugely more dramatic.
BP is fundamentally a very sound business, so there is no reason why the share price should do what it is – after all the value of a share (or a company) is ‘the discounted value of its dividends to infinity’. So even though this year’s dividend payment carries the most weight, the value of the share would be little affected even by such a large penal cost. Reducing the share price opens the company up to being taken over, and there would be two prime candidates to do so:
1. A US Company – and if the action of the US and particularly its President were to cause the company to be bought by a US giant – we might be extremely annoyed about that. We might even be furious.
2. A Chinese Company. Now we need to bear in mind that China has about 22% of the global population but only 4% of global production and they are at or through peak production. They might therefore be quite inclined to take the production to China. Don’t you think? Just as they now are with food being grown in parts of Africa on land that China has ‘long leased’, and minerals where China is locking many production facilities around the world into supplying China.
If China were to finish up owning BP the impact on the rest of the developed world could be very serious and not take long to come into effect. It is easy to think ‘short’ where people react instantly to situations that occur without thinking long enough to understand the real implications and those who think short and react fast are often surprised by outcomes.