Energy Giants Leave Town
Posted by slowsmile November 12, 2009
I’ve written many articles on the state of the dollar and the US economy. But here, off on a different track, is further evidence that business in the US is not what it should be. From an analysis of the many big US business enterprises in the US, you don’t get much bigger and richer than oil corporations and all their accompanying business networks. Here is an analysis of Ensco’s recent corporate move abroad from US soil by Michael Lynch. First there is the summary that represents the innocuous, economically inoffensive and blurry reason statements by Ensco as to why they are moving their corporate base from America to UK. Then there is the economic Analysis, representing a painful but logical damnation of the US Economic situation as it stands today.
This on-going desertion of America by its big corporations is happening in direct proportion to the continued shrinkage that is currently persisting in tandem with both the American economy as well as within dollar value. For all those who still believe that American global leadership and the US Dollar will both persist and continue, to finally emerge triumphant as before — I present this depressing evidence as an undeniable indicator and support for the opposite view. To me this is clear evidence of difficult long-term trials ahead for both the US economy as well as the dollar. And due to the peculiarity of current government economic policies, this economic slide is set to continue for a long while yet.
Ensco gets out of town before it’s too late
Summary
Ensco announced that its Board of Directors has approved a plan to change the company’s corporate structure. Ensco’s legal domicile would change from Delaware to the U.K. Most of the senior officers would be based in the U.K. where the company has substantial operations. The move will enhance management efficiency, improve access to key customers, enhance access to European investors improve perceptions that Ensco is a global offshore drilling contractor and reduce tax rates.
Analysis
Ensco follows super-giant drilling contractors and Nabors and Transocean out of the U.S.A. and joining oil field service companies service companies Weatherford International, Halliburton and Schlumberger as expatriate companies. Except for Schlumberger which has always had its headquarters in France, these are American companies who have abandoned their traditional headquarters in Dallas, Texas, Weatherford, Texas and Duncan,Oklahoma. Why are they doing this? Why have these moves occurred in the last few years? The companies say that their business is international and that activity in the U.S.A continues to decrease over the years. The big jobs are overseas. Still, it is reasonable to ask if financial and regulatory burdens in the U.S.A. have contributed to the migration. More importantly, will the 3 major U.S. oil companies also jump ship?
ExxonMobil generates about 80% of its income from outside the U.S. Chevron and Continental have significant foreign operations. Recently both ExxonMobil and Chevron have decided to greatly reduce their presence in the American retailing market. Regardless of the usual management statements about why they are leaving, the facts suggest that big companies, particularly big energy companies are losing confidence in the policies of the U.S. government. Higher taxes are a given. Taxes on carbon emissions are looming. Regulations become increasingly burdensome. And then there is a looming problem with the dollar. An extremely large portion of oil industry business is conducted in U.S. dollars. Some nations are losing confidence in the dollar. Could it be that American companies are trying to insulate their treasuries from the consequences of a dollar collapse?
November 12th, 2009 at 12:43 pm
Slowsmile:
Grim. Obama’s swerve left reminds of the famous Churchill - Atlee story. Churchill entered the Men’s Room in the House of Commons and took a place at the urinal oppositie Prime Minister Clement Atlee. “A bit stand offish?” said Atlee. “No”, replied Winston but everytime you see something big you want to nationalize it.”
As an expatriot Brit you know Atlee defeated Churchhill and served as PM from 1945-51 introducing socialized healthcare and nationalizing a third of British indutry that some say started an inexorable decline of the UK.
Now it is Obama’s turn to wreck one of the world’s great nations and he is plunging in with a frightening zeal.
November 12th, 2009 at 9:07 pm
Slow down the loss of US corporate jobs! Too late.
For so long now, a large segment of our population has been demonizing not only giant oil companies like Exxon, but any “corporation” as evil incarnate. It was a simple political game for most who simply chanted in the rhythm of the chorus of blame. And the castigations were not all always without reason.
Corporate management choices and policies and their sometimes brutish or unintended consequences in a complex world made to seem simple by bumper stickers and political slogans was reason enough for all of us to exercise our right to complain about the stupid or arrogant phone company or gas station raising prices fast but lowering them slowly. The latter being the jerks who make us buy gasoline that pollutes our air and as Al Gore says will drown us in wandering liquid icebergs sooner rather than later or force us to become refugees seeking higher ground.
They did make us buy it, right?
Not sure about that, but am sure we will someday rue the day we did not value our industrial and economic assets as much as the rest of the world does theirs, some of which were once ours.
Flaws and alls.
We may not individually ever admit it, but anyone and everyone with power, from your local politician or regulator, to Obama, Bush or the US Congress, anyone holding the cards to commercial or political rewards, abuses that power, intentionally or unintentionally.
Especially in our increasingly efficiently political world, the most ubiquitous growth industry on a tear, ever. Vastly underestimated in the statistics.
International corporations will go to where the economic growth is. We are killing economic growth in America for the reasons argued by slowsmile and a few more.
November 12th, 2009 at 9:40 pm
Richard…A very apt comparison. After the Second WW the UK was in a horrific mess and broken economically. As you say, Atlee nationized everything from the railways to energy industries to health care. Then thru’ the years, all these industries were eventually re-privatized ro make them more efficient and competitive again — all except health care. It has taken governments nearly 70 years to rid the NHS of gross inefficiencies, overspend and bad service. Their was also a period in the 60s and 70s where doctors who were educated in the UK then left to work abroad for better money — called the Brain Drain. The NHS costs have since risen to 8% of UK GDP, which is a huge spend.
It is also well known that in the UK, and due to the heavy costs, there has been a discreet withdrawal of service for certain sectors of the population. If you are very young or above 50 y o, and suffer from a long and debilitating injury or disease such as coma for example, the doctors will advise that all medicines and food be withdrawn for the patient. In the late eighties, my father had an aneurism in his neck and was in coma. After only two weeks, the doctors advised withdrawal of all medicines and food. I protested, but other family members allowed it. I fully admit that my opinion on the NHS system is biased, but with very good reason I think. This same protocol will arise in the new health care system in America — the only reason being so that the government can save money…
When Obama’s health bill is passed — mark my words — it will be all the worse for Americans. The Bill will also initially provide inefficient, uncompetitive and expensive health care for US citizens. Don’t listen to the blab from the government, who are, without any doubt, in the pockets of the health sector.
The so-called public political debate concerning health care is merely a distraction because the health care bill has already been decided long ago in the health sector’s favour. In The Houses and at the Committee stage, these health care decisions and issues have already been bought and paid for by the health sector.
Bad for America and her citizens.
November 12th, 2009 at 9:54 pm
Chief…Right on. Because these large corporations are leaving, what will be the impact on jobs in America? Along with the demise of the dollar, unstoppable and ever-growing US debt, a bought and paid for government and an ineffective leader, where is the hope and change? Has it appeared anywhere yet?
Obama soon departs on his gracious tour of the Far East. Obama’s policies and personality will have no impact in this region. They will outplay him at every turn. Another non-result. But the trip will be a lovely holiday for his family.