As the Thunderer reports, the man who has built a considerable fortune largely through the process of mimicking others’ consumer products and plastering his highly-visible brand stickers all over the copies, Sir Richard Branson, is about to move into virgin territory, indeed, by taking on the ghost of John D Rockefeller.
According to the paper, Britain’s favourite “entrepreneur” aims to put $100 million behind his latest scheme to build an oil refinery for airline fuel. Yes, the Bearded Wonder is said to be about to launch a new company called – you guessed it! – “Virgin Oil” within four or five months and is “seeking to attract funding from other airlines and the Government.”
Apparently, burying a hatchet of many years’ provenance, he has held “informal talks” with Willie Walsh, the incoming British Airways chief executive, about the proposals (THAT must have been an interesting exchange!).
But, not content with this, our man from the tropical paradise has scented an easier mark, for Sir Richard has seemingly exploited the crass celebrity-worship of our New Labour masters, while also playing up to our ineffable Chancellor’s ever present desire to meddle in the markets.
As he told the Times, Sir Richard ‘s crusading plan to build a $2 billion oil refinery will not rely wholly on gaining private investors’ approval of the project’s long-term viability.
“The big oil companies are making extortionate profits out of the current oil price,” he announced, in his most calculating, populist style. “The biggest problem with the oil price is the lack of refinery capacity. There is enough oil for everyone in the world, but the refineries are just not there. There has been talk of a windfall tax on big oil companies. Perhaps the Government should use that money to invest in refinery infrastructure.”
Hmmm, apart from the man’s chutzpah at thinking that aircraft fuel is just another cola derivative or scented foot scrub, and that he can just step straight in and beat the oil majors at their own game (though a hearty good luck to him, if he succeeds honestly, of course), note that what he really wants here is for the ever-rapacious UK Chancellor to steal others’ private property and to transfer it to his, Branson’s, pocket.
This will have the double benefit of allowing Sir Richard to play plucky little David to the Goliaths of Big Oil – and so to enhance his status as a secular saint in Britain – while simultaneously creaming off a tidy sum of both public and private money into his opaquely-financed and personally-held fiefdom, that Magic Kingdom of his which nestles – reassuringly far from Gordon Brown’s sweaty grasp – under the balmy skies and beside the azure seas of the tax-friendly Caribbean, where the only kind of “windfall” to be endured is the one marked by the gentle “thud” of a ripe coconut burying itself in the shimmering silver sand.
Class!
Incidentally, what also goes unsaid here is that the oil companies’ ‘extortionate’ profits to which he cunningly alludes are arguably a temporary fiction, not of their unfair predominance, but of their failed entrepreneurial vision (or else a regrettable consequence of their officially-forestalled entrepreneurial ability).
After all, had Big Oil correctly foreseen the current state of demand in good time – and been enabled to act upon it – it would presumably have put in place the necessary extra capacity already and though the oil price may well have been lower than it is today, as a result, the majors and their satellites might well have sold even more of the stuff and for longer, thus earning even more money than they do today!
What no-one thinks of either is that this outbreak of the politics of envy – which is what is involved in stealing their money with post-hoc rules (“windfall taxes”) and redistributing it to buy votes – (a) hinders the price mechanism from promoting the usual market response to increased scarcity; (b) lessens incentives, and (c) reduces the means, for the investment which industry is being urged to make in order to create all this wonderful new capacity and so lower prices in the future.
Maybe the ever-mischievous Vladimir Putin will shortly find an opportunity publicly to return the favour and taunt Breton and Brown, et al, for such an arbitrary and extra-legal expropriation of oil shareholders’ wealth!
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Incidentally, a very quick check shows that the top independent US refiner, Valero, alone has increased gross fixed investment 13-fold since 1999 and net FI 33-fold since 2000, for a cumulative gross sum of $3.5 bln – equivalent to 40% of starting gross fixed assets and slightly more than 100% of aggregate net income in the period.
Not too shabby for a ‘price gouger’!
The late great Irish comedian Dave Allen once said of Virgin Airlines, that he personally wouldn’t travel on an airline that didn’t go all the way. I think that says it all.
Oh, wait – there’s the little matter of how Virgin started as a sort of non-capitalist thing that Branson somehow morphed into a standard corporate entity, that somehow had him in charge and all the other founders somehow not there any more. Does that say it all?
His oddball personality and convulted empire aside, Richard Branson is making a good point here – there hasn’t been a new refinery built in the U.S. since 1976. Valero, Murphy Oil, Exxon, et al have indeed “invested” a lot in their existing refineries to scrape out more productive capacity. These investments, while very profitable at the margin, are not keeping up with demand. Look at any report at eia.gov – refineries are running flat-out. Excessive environmental regulations are what is keeping refinery investment down. If Richard Branson can use his celebrity and popularity among the Socialists and enviromentalists to overcome this obstacle, more power to him!
The problem is that Branson is blaming the oil companies, not environmental regulations. He claims they are “holding the world to ransom” in order to profit from the current energy crisis. He is pushing for the British and French governments to support his consortium by placing a windfall tax on oil companies and using the revenue to fund new refinery projects.
No extra US refineries, but plenty of extra capacity. Besides which a glance around the newswires will show that the Egyptians, Saudis, Emiratees, Indians, Ukrainians, Koreans, etc., etc., – who all live outside California! – are all planning or building more as we speak. The irony is that the fruits of Branson’s attempted legal banditry might well get to market just as all this new plant comes on stream and as high prices quell demand, as they did rapidly in each of the previous oil shocks. Wouldn’t that be a shame?
Corrigan, which is why he’s wanting Government to partner with him in the venture. If it tanks, the losses won’t be out of his pocket, it will be covered by taxes.
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