Daily Archives: July 12, 2005

It’s been a tough year for BP

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thunderhorse.jpgFirst, British Petroleum had to deal with the explosion at its Texas City plant earlier this year.
Then, yesterday, BP discovered that Hurricane Dennis had damaged its huge Thunder Horse Drilling Platform in the Gulf of Mexico over the weekend, as the picture on the left of the badly listing platform reflects. BP’s press release on the damage is here.
Hat tip to Clear Thinkers reader Charles Satterwhite for the amazing picture of the listing Thurder Horse.
Update: Kathy Herrmann is analyzing the technical and financial implications of the damage to Thunder Horse over at Big Cat Chronicles.

On foreign aid

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posner2.jpgThe always entertaining Richard Posner (prior posts here) weighs in on the efficacy of foreign aid:

I do not favor foreign aid, debt relief (which is simply another form of such aid), or other financial transfers to poor countries, in Africa or anywhere else. Countries that are not corrupt do not require foreign aid, and foreign aid to corrupt countries entrenches corruption by increasing the gains to corruption. Foreign aid to Zimbabwe, for example, will simply prop up dictator Mugabe.
Foreign aid makes people in wealthy countries feel generous, but retards reform in those countries as well as in the donee countries. . .

Meanwhile, over at Mahalanobis, Michael Stasny refers to this Bill Easterly paper on foreign aid (pdf):

If Zambia had converted all the aid it received since 1960 to investment and all of that investment to growth, it would have had a per capita GDP of about $20,000 by the early 1990s. Instead, Zambia?s per capita GDP in the early 1990s was lower than it had been in 1960, hovering under $500.

To which Tyler Cowen reminds us that, as of 1960 or so, Zambia and South Korea had roughly the same standard of living.

Strong medicine with serious side effects

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gambling-9949.gifThis post from yesterday made the point that that most medications are toxins that often have serious side effects, but that the risk of those side effects has to be weighed against the benefit that patients derive from the medications. However, the side effect noted in this article is, might we say, a bit difficult to weigh:

A Mayo Clinic study published Monday in July?s Archives of Neurology describes 11 other Parkinson?s patients who developed the unusual problem [of becoming compulsive gamblers] while taking Mirapex or similar drugs between 2002 and 2004. Doctors have since identified 14 additional Mayo patients with the problem, . . .

Chevron’s pitch to Unocal shareholders

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chevron_logo.gifIn this WSJ ($) op-ed, Chevron Corporation CEO David O’Reilly makes the case to Unocal Corp. shareholders for choosing Chevron’s lower bid for the company over the China National Offshore Oil Corp.’s higher bid (here are the previous posts on the Chevron and CNOOC battle over Unocal).
Mr. O’Reilly does a reasonably good job in making his case. His main point is that Chevron’s bid is a sure thing that is much further along in the approval process than the CNOOC bid. In short, he advises Unocal shareholders to take the slightly smaller Chevron bird in the hand rather than the bigger CNOOC one in the bush.
But in making his case, Mr. O’Reilly veers off course with his second argument:

The second critical issue is in the arena of public policy. For the U.S. government, the proposal by Cnooc presents fundamental questions about fair trade that have profound implications for all U.S. businesses. Contrary to claims by Cnooc, the company’s offer is simply not a commercial transaction. The company is 70% owned by the Chinese government and is relying on large subsidies in the form of government loans at below-market rates to finance its $18.5 billion offer. A conservative analysis shows that the value of these subsidies is at least $2.6 billion or $10 per Unocal share. These terms are simply not available to commercial companies operating in the open market. If Cnooc were to finance its offer on truly commercial terms available to most non-government owned corporations, as Chevron is, it simply couldn’t make a competitive bid.

Stated another way, Mr. O’Reilly reasons that Unocal shareholders should reject the higher CNOOC bid because CNOOC’s bank (i.e., the Chinese government) is willing to loan the company too much money.
My sense is that this argument might work on U.S. Congressmen, many of whom tend to gravitate toward dubious mercantilist policies. However, arguing to Unocal shareholders that they should reject the CNOOC bid because CNOOC’s bank is willing to loan CNOOC so much money that the company can overpay the Unocal shareholders strikes me as a reason for Unocal shareholders to embrace the CNOOC bid, not reject it.