THE OIL TRUTH
Why does the public have such poor perceptions of the oil industry?
THEY TAKE only 33c of every litre of petrol bought from service stations. They take less from their commercial, industrial, and agricultural sales. They deliver motor fuel to service stations where (before it is taxed) it is sold for less than what a world famous soft drink company with similar logistics sells a litre of its caffeine and sugar water.
The price motorists pay is higher of course, because there is the dealer profit to add – along with various levies and taxes that go to the state in one form or another.
People everywhere dislike oil firms. Their products are a grudge purchase. There is no alternative as convenient or as efficient and this makes buying petrol or diesel irritating. Blaming the oil industry is a way of letting off the steam.
The effect on the oil industry reputation is harsh. In South Africa, no matter how much money it spends on social investment. No matter how well it meets employment equity targets or government demands that divest 25 percent of oil companies to historically disadvantaged people, no matter that it meets gender equality demands or spends millions avoiding spills or even more millions cleaning up when such accidents occur, nothing seems to change public perceptions.
Even when people understand that the pump price of fuel is mainly taxes and levies that are sent to the government, they insist that petrol and diesel are too expensive – and blame the oil industry.
Even when reminded that oil companies daily perform miracles of logistics to get top quality fuel to every corner of our large country; even when petrol and diesel are produced more cheaply than a litre of lager beer, negative perceptions persist.
Oil company employees below supervisory level also have false ideas about the industry and even the companies that employ them. They too are unaware of how the public views the oil industry.
Even at managerial level, one finds such ignorance.
Wondered why so many service stations have convenience stores? It is because selling petroleum products is not very profitable.
Point at its poor image and most in the industry deny it, ignore it, or retreat behind a wall of silence. Inevitably poor perceptions of the oil industry rumble on.
The media report good news with small headlines and little comment. Bad news attracts a searchlight and metres of column centimetres of punditry. Bad news brings all poor and ignorant perceptions to the surface, voiced everywhere from dinner tables to the street. They range from the partially informed to ludicrous.
People say oil companies are fabulously wealthy, spend money like water and keep mounds of cash. They pay huge salaries and operate in a regulated market that favours them. Some believe that oil companies do not care what kind of government is in power as long as they can rape the planet, continue stealing the wealth of underdeveloped countries and cause global warming.
The price of petrol at a service station is the profit an oil company gets from every litre. All fuels are the same, with only different labels. Oil companies own all the service stations in South Africa and they employ thousands of people. Anyone should be able to open a service station, but the oil companies jealously guard their monopoly. They should build their refineries away from suburbs. Those that are near homes should be moved.
Misperceptions
The above is a mere slice of the general misperceptions, all of which are untrue or at best only partly so.
“Fabulously wealthy” is relative. It is massively expensive to find oil, extract it, to build refineries to transport their products to service stations, factories, farms, mines, other industries and enterprises.
A tanker-full of crude oil costs millions of US dollars. Oil companies need to have access to large sums in cash or credit – one reason they are notoriously tight with money. Their advertising spend is minimal. They constantly search for ways to save money. Salaries are monitored to keep them in line with local conditions.
Yes, crude oil is a commodity; but not all crudes are the same. Some are easy to refine. Others need special processing at greater cost. As for motor fuels, anyone selling off-spec fuels for modern motor cars risks high repair bills if not a court case. Catalytic converters are particularly sensitive. Wondered why so many service stations have convenience stores? It is because selling petroleum products is not very profitable (although it has improved in recent years).
Oil companies are not the hidden arm of British, French, or US foreign policy. In fact, they pay their taxes on time and obey any government regulation. They are not a fifth column despite what thriller writers and Hollywood films allege. Poor governments have seen major oil companies withdrawing even when it meant leaving a profitable market. Nigeria is an example. It was 1979 and the company was BP.
The idea that the industry is dominated by white males is out of date as any walk around the head offices will show. In fact, as far back as 1979 they were training black entrants to the industry only to see them snapped up by others. Whites-only oil companies in South Africa are the invention of socialists. The industry is the quintessentially successful private enterprise.
Most developing economies welcome the major oil companies. They know governments can rely on them to gather levies and taxes on fuel, efficiently and on time. As for contributing to an allegedly catastrophic warming of the planet, the jury is out – at least among meteorologists and scientists who retain an objective approach to their discipline. (The planet has not warmed a bit in the last 18 years during which time oil consumption has risen).
Working for a major oil company is no guarantee of a job for life. Most of them regularly remove dead wood. Pump attendants do not work for the oil companies, despite the colour of their overalls. They work for whoever runs the particular service station. Petrol is not all the same. It leaves the refinery with the same specifications, but it leaves company depots containing whatever additives the specific oil company chooses.
Major oil companies do not own all South African service stations. The law forbids it. They have to rent them out. All crude oil refineries in South Africa were originally built far from any suburb. Chevron in Cape Town built its refinery downwind north of and beyond the city limits. Only later did suburbs encroach.
When the two Durban refineries were built, they too had no domestic neighbours. Fifty years later, they surround them. To move them further away now would be impossible both physically and economically.
Will these truths change inaccurate public perceptions? The balance of probability suggests it will not.