‘Big Oil’. ‘Big Pharma’. ‘Big Food’. ‘Big Agri’. ‘Big Banking’. All attract hostile but misguided activism.
In recent years, three dozen 3D seismic surveys have been conducted in South African territorial waters, along with many more 2D surveys. There have been no documented cases of harm to marine mammals, fisheries, coastal communities, or dead ancestors living in the sea.
Yet the moment Shell tried to conduct one off the Wild Coast, the globally funded eco-activists turned up, to manipulate unsophisticated local communities with unfounded forecasts of calamity, and launch obstructionist lawsuits that even when they fail, create major delays and costs.
The same happened during the Karoo shale gas controversy a decade ago. A careful consideration of the science and track record suggested that any risks would be modest and manageable, but a loud anti-Shell campaign was launched that eventually chased the company away.
Very few people could name the other oil and gas companies that were interested in Karoo shale, or indeed other South African oil and gas resources.
Ever heard of Falcon Oil & Gas? Or Bundu Gas & Oil?
How about Sungu Sungu, Afro Energy, Tetra4, BlackGold, Statoil, Chesapeak, or Moonstone, all of which have, had, or are interested in, exploration or production permits for onshore gas drilling in South Africa.
Chased away
Unlike Shell, which couldn’t be bothered to continue with its application for exploration rights in the face of endless dithering by government and legal obstructionism by environmental lobbyists, Falcon and Bundu are still pressing ahead in pursuit of drilling the Karoo today.
Yet how many times have you seen the names Falcon or Bundu on protest posters?
The same happens to other oil and gas majors. The Greenpeace people are always out sabotaging or trespassing on ExxonMobil, TotalEnergies, BP, or Chevron properties.
They conveniently ignore SaudiAramco and Sinopec, which are both larger and more suspect than the Western oil and gas majors.
They also ignore Pertamina, Bharat Petroleum, Valero Energy, Eneos, Idemitsu Kosan, Phillips 66, Neste, Kinder Morgan, Woodside Energy, and most of the other 158 oil and gas companies that are smaller than Chevron.
Big versus small
With other industries, it’s no different. Everyone is quick to blame Big Tech for all their ills. When Amazon comes to invest in South Africa to build a glorious new mixed-use office complex in Cape Town, the activists see a famous Big Tech brand and go nuts.
Deploying fake ‘local communities’, they astroturf their way through several years of court cases, ultimately losing, but costing the developers time and money.
No matter that new buildings get built all the time by companies with lesser profiles.
Big Pharma is a scapegoat for all sorts of real and imagined evils. Nobody pays attention to the smaller drug companies that do their dirty work out of the limelight.
Everyone gets het up over whether McDonalds provides a varied, balanced diet, but nobody bothers to challenge the local greasy spoon frying up heart attacks in week-old trans fat, or the corner ice cream shop that serves diabetes in a sugar cone.
And that’s where the paradox lies.
Even in the case of fossil fuels, the reality is that we cannot just stop all fossil fuel development overnight. We cannot go without modern drugs. We will never eliminate fast food. And we’re all beholden to Google or Apple or Microsoft or Facebook or Xitter (pronounced with an sh-sound).
Valuable brands
If you’re going to have someone drill for gas, or build a nuclear power station, or erect a new factory, or build a headquarters, or do whatever it is these companies want to do, you actually want it to be a big company with a prominent brand.
Big companies have valuable brands to protect. If you want a company to follow the rules, comply with laws and environmental regulations, and employ hundreds of people whose sole job is to minimise environmental, health or safety violations, then you want a big company that cannot afford public relations disasters.
Small companies don’t care. They don’t need to care. They can do whatever they can get away with, because nobody other than the occasional bribable official is watching.
Big companies cannot do that. Even if what they do is technically legal, they don’t want to be in the headlines over regulatory missteps, or pollution concerns, or adverse drug effects, or other mistakes.
But BP blew up Deepwater Horizon, I hear you say. That’s true. They were careless, and the other oil majors are livid with BP for letting that happen. But BP also got severely punished for that accident.
The day before the oil well blew out, on 19 April 2010, BP was worth $59.88 per share, for a market capitalisation of $172 billion. Two months later, on 21 June 2010, all that was left was $27.02 per share, for a marcap of $78 billion. It lost 55% of its entire value, or $94 billion, as investors pulled out capital to redeploy to companies that don’t piss in the Caribbean.
It never recovered its pre-blowout valuation. Today, it trades at $38.26, or $110 billion, fully 36% lower than before the accident, and 49% off its 2007 peak.
There are severe consequences for screwups, if you have a large, prominent brand to protect.
Fly-by-nights
I’d be much more comfortable eating at a big-brand fast-food joint, where I can expect at least some level of quality assurance and compliance with health regulations, than at some shady fish and chips shop called Moe’s.
I’d rather buy drugs from major pharmaceutical companies than from fly-by-nights I’ve never heard of.
They don’t get it right 100% of the time, but the reason you know about Vioxx and Thalidomide is because of how rare such scandals are. The US Food and Drug Administration has registered about 20 000 different drugs, with very few serious concerns of the years.
In general, if you want something done by the book, following not only appropriate regulations, but also being responsive to public opinion, get a big company with a major brand to do it.
If we’re going to drill for gas, for example, I’d rather Shell does it than minor players like Falcon or Bundu.
Vigilance
That’s not to say we shouldn’t have any concerns about big companies, of course. They can still do plenty wrong.
The most dangerous is probably regulatory capture, by which they lobby or bribe governments for rules that favour them and disfavour their rivals.
(An excellent treatment of the awkward relationship between classical liberalism and big business can be found at TechCentral, written by Bloomberg’s Adrian Woolridge.)
Being vigilant is important, even with big organisations that do care about their public relations image.
However, the irrational bias against (and even hatred of) big companies, which overlooks the far greater risks posed by smaller firms that fly under the radar, is misguided.
Always ask yourself whether you’d rather a big company with several floors full of compliance officers do a thing, than leaving it to some under-resourced company you’ve never heard of and which doesn’t have a public image to protect.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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Image: Leonhard Lenz, CC0, via Wikimedia Commons