The costs of war are closing in on consumers everywhere.
Things will become expensive.
It will be difficult for us.
Unfortunately, you can't do much about it.
European farmers say food prices are going up too.
We could have a serious availability problem next year.
And if that happens, you're going to see an increase in food prices and you're going to see a challenge in the availability of it as well.
Yes, the impact of the Iran war is coming home.
World Business Report from the BBC World Service.
I'm Ed Butler, and today we're going to be looking at a variety of stories affecting the oil industry.
It begins with the sacking of the chairman of BP.
What's going on there?
And we're hearing from India and Ireland on fears affecting the wider oil industry as well.
So today we'll be beginning our far and wide scouring across the energy market with BP.
This is the oil giant which has today surprised everyone by suddenly removing its chairman, citing what the board called serious concerns over his conduct.
Albert Manifold has worked for the company for less than a year, after a period of some turmoil at its head.
Here's the BBC's business editor, Simon Jack.
The BBC understands that concerns over Albert Manifold included behaviour described by one source as bullying and overbearing.
A second source agreed with that description and added that dismissing him was, in their words, a big lever to pull.
You wouldn't do it unless it was serious.
BP declined to comment on allegations of bullying but said in a statement it had been surprised and disappointed to learn of governance, oversight and conduct issues it deemed unacceptable.
Mr Manifold took over as chairman in October last year and oversaw the hiring of a new CEO, American Meg O'Neill, with a plan to refocus the company on oil and gas and away from investments in renewables.
The board of BP confirmed the decision to remove Mr Manifold was unanimous but stressed there was no change in the company's new strategic direction.
Well, after the announcement of Mr Manafort's sacking, BP shares did fall by 4%.
BP has had a troubled decade as its share price has struggled to keep up with its rivals.
Mr Manafort was brought in to spearhead the firm's efforts to concentrate on the core oil and gas business.
This after a period when...
Previous bosses had trumpeted its interests in growing the renewable energy interests.
I've been speaking about all of this with Mark Van Baal.
He's an activist shareholder and a supporter of the more environmental approach at BP.
He's based in Amsterdam.
Yeah, we expected Albert Menefold to fix that broken climate governance with NBP after he got a very strong signal from his shareholders.
So from our end, we're waiting for an apology to shareholders and a better way of dealing with shareholders.
But yeah, the board has ousted him.
Explain what his agenda had been.
So his agenda has been to fully focus on fossil fuels, again, without consulting shareholders.
And that was already the agenda of the previous CEO after Elliott arrived as a small activist shareholder.
So were you a supporter of Albert Manafort?
Thank you very much.
We told him at the AGM.
You get a very strong signal from your shareholders now that you should listen to him and engage with them again.
Apparently, his fellow board members didn't give him a chance to fix that.
Maybe it was not his plan.
The board says they are citing issues around governance standards, oversight and conduct issues.
It all sounds a bit vague.
It's only eight months, as you say, since he took over to oversee this strategy revamp, as they're calling it.
So do you have any suspicion about what's really going on?
I suppose it's about governance.
Yeah, he completely ignored his shareholders.
He refused a shareholder resolution filed by us, 16 institutional investors.
So I think that was his biggest fault, that he refused a shareholder resolution.
And that's why he got such a high vote against him at the AGM.
It's a tough time, isn't it, for BP?
I mean, you've got this happening now.
We had just last year the previous boss Auchinlos, kind of also leaving under, let's say, fairly mysterious circumstances.
A couple of years before that, we had Bernard Looney fired after lying to the board about a personal relationship with a colleague.
This is a catalogue of turmoil at the top level of this company.
Yeah, and it goes on and on because yeah, this is the second time in a row that the chairman is leaving because of governance issue.
And I think that's really at stake here.
BP not listening to shareholders thinking that they should completely focus on fossil fuels again, with a decline in demand looming at the horizon?
Yeah, I mean, you say, obviously, we've got very, very high oil prices at the moment.
We've got record profits for some of these oil companies.
You think now is the time to be focusing more on the green transition?
Absolutely.
Because the high oil prices are, yeah, war prices.
It's because of a temporary oil shock shortage in supply.
But the big picture is that because of electric vehicles, because of China, the demand for fossil fuels will go down after 2029.
That's what the IEA, the International Energy Agency, predicts.
So that's the big picture.
So if you want to thrive as a company in a declining market, you have to diversify.
The only way to diversify is to invest in clean energy, which gets cheaper by the day.
So this temporary shock doesn't say anything about the underlying overall direction of travel, which is from fossil fuels to renewables.
Any sense that this is an opportunity for people like yourself who are urging more focus on that transition.
At the moment, investors are a bit reluctant to push hard for change because they're blindsided by the enormous windfall profits.
But as soon as the Strait of Hormuz goes open again, it becomes clear that the end of the fossil fuel area is at hand.
Then, of course, investors are be asking more and more for diversification.
Otherwise these companies will be the codex of the 21st century, as in a white elephant yesterday's company.
Yeah, we all know the story about kodak they invented digital photography and refused to invest in it, and then they went bankrupt.
The thoughts of the BP shareholder, Mark van Baal.
Well, we'll be talking about the wider oil shock in a second, but let's look at one country in particular first.
While global crude oil prices have been holding fairly steady at around...
$100 a barrel this week, petrol and diesel prices in India have continued to rise.
This is a reflection of a weaker rupee and heavy taxes on petroleum products.
As well as Indian retailers fear over the lingering geopolitical risks.
Here's the thought of one Indian motorist.
We caught up with gazing at the spiralling prices on the dial while he refilled his car in the capital, Delhi.
It was highly expected.
Of course, seeing the global scenario, it was expected that the prices will go up any day.
It was just that we were waiting for it.
Things will become expensive.
It will be difficult for us.
Unfortunately, you can't do much about it.
The thoughts of an Indian motorist.
Well, the crisis has seen India's once buoyant stock market slip of late.
The Nifty and Sensei stock markets have been among the worst performing anywhere in the world this year.
And a lot of it has been driven by the surging costs of fuel in that country.
I've been speaking about this with the Indian energy expert, Narendra Taneja.
We heavily depend on imports for our petrol, diesel, LPG, kerosene, turbine fuel requirements.
We import 89% of our total requirement from 42 different countries.
I'm of course referring to crude oil.
And then we refine it and process it and distribute it across the country.
So we consume roughly 5.8 million barrels of oil every day.
And out of which 5.3 million barrels of oil we import from, as I said, 42 different countries.
And a lot of it is coming through from the Gulf.
Well, a lot of it used to come from the Gulf, since the Ukraine war started, from Russia and from other countries.
As I said, from 42 different countries as part of the strategy to diversify.
But most of it used to come from nine countries, majority of them in the Persian Gulf area, like Saudi Arabia.
United Arab Emirates and Iraq was a major supplier and Kuwait an important supplier.
And in terms of LNG, that is, liquefied natural gas, Qatar was the main supplier and LPG again, Qatar was the main supplier.
However, since the state of Hormuz got closed thanks to the war, India had to, you know, go wherever we could find our oil from now.
So, We are increasingly importing more from Russia, of course.
The volumes have gone up.
And the United States of America and Canada, even Norway and Brazil Guyana Algeria Nigeria, among other countries.
Is there enough supply?
For India?
I mean, for the market?
Yeah, that's a good question.
We have not faced any significant disruption in terms of supply.
However, for our economy, the two things are important.
Of course, the physical supply of crude oil.
But more important than that is the economics means, the price, the cost.
So yes, we have managed to by and large, secure, sufficient supplies.
But the economics has been a huge challenge in the sense that you know, when you look at the price of Indian basket, Indian basket means the price that our importers pay for buying crude oil from different geographies.
That is significantly higher than, let's say, the price that you see on the television screen or the market screen.
Let me give you an example.
They say the price of Brent crude is $110 per barrel.
But for Indian basket, it's always typically more than that.
It can be $100.
It can be 125 per barrel because the cost of shipping has gone up, the cost of insurance has gone up and many suppliers, especially those from far-flung areas, their economics has gone up.
So therefore, supply is not such a big issue, but price is a big issue.
And as we're seeing, I guess, in countries around the world, this has a knock on effect in all kinds of other areas, even the cost of food and everything.
I mean, inflation presumably is affected by this.
Well, you see that it has, of course, has impacted the value of Indian rupee vis-a-vis dollars, in particular, since you know you pay in dollars for buying oil from multiple sources.
And of course it has a kind of its own effect on retail in terms of vegetables and eggs and butter and so on and so forth.
Yes.
But however, in the sense that India managed reasonably well in terms of petrol diesel, prices were not increased.
The effect is there.
The impact is there, but it's not as large as this could have been, had these companies increased the price of petrol and diesel from day one, as they did.
Steve McLaughlin could mean a reopening of the strait.
How quickly would that even reflect on the streets of India when it comes to retail prices for refined products?
Well, when you look at the entire cycle in the sense that you buy crude, you ship it, you refine it and then you distribute it in a vast country like India,
And at the same time you know the kind of ground reality in the state of Hormuz.
Let's say, for the sake of discussion, if there is some kind of breakthrough and there is peace and the state of hormones is allowed to be open.
Then in that case also, there are about 1,600 ships, mostly tankers, are stuck there.
And my assessment is that, you know, an analysis is that it's going to take long time before actually, all these ships are able to move out of that.
So typically four to five months.
My sense is I don't think that things are going to get back to normal.
Even if there is a peace deal tomorrow, it's going to take four to five months.
The thoughts there of the Indian oil analyst Narendra Taneja.
Well, discussions between Iran and the US have been continuing.
On Tuesday, the US Secretary of State, Marco Rubio, admits there is still more talking to be done before any formal peace deal can be reached between the two sides.
I think our position is well stated.
The president had a very important I think historic call just a couple days ago with a number of leaders from the region.
I think there's strong alignment and agreement on what a preliminary draft should look like.
I think, like anything with something like this, it's going to take a couple days to settle on, even down to the disagreements over a word.
If there's going to be a deal, we're going to have to work through that.
But it's either going to be a good deal or there isn't going to be one.
Well, Iran meanwhile says yesterday's US attacks on missile sites on the Iranian mainland were a clear violation of the ceasefire deal.
In the last hour or so there are new reports of a Western oil tanker being hit off the coast of Oman.
Laurie-Anne Lorocco is president of the trade supply chain data consultancy firm Lorocco Consulting.
Hi, Laurie-Anne.
So in New York, tell us.
I mean, you know, once again we've had off again, on again discussions this week sounding more off than on, it seems like to me today.
I mean.
The question I have is When this delay sees a further hike in the oil price.
So far it's hovered generally, hasn't it, around the 100 mark.
But you know, is there an inventory concern now the gradual drawdown of all these long-term strategic reserves and the pushing up.
I mean, when's that going to start meaning pressure on Western oil prices?
Well, when you look at what's happening in the West, everyone's getting socked.
Everyone is very impacted when it comes to the price of gasoline and the price of diesel.
Food prices in the United States are up.
Gasoline is up.
When you're looking at the United States, and what drives me crazy is that the president says the United States doesn't need the oil that comes from the Strait of Hormuz.
Well, technically, yes, the United States has its own oil.
It's the chemicals, it's the LNG particles and all that that make the chemicals for the paints, the fertilizers, the helium for the MRI machines.
That impacts all of us.
And so we're getting smacked.
You're seeing that across the board where manufacturers around the world are closing down.
Like in Malaysia, Japan is being impacted.
China is being impacted.
Thus, U.S. manufacturing is impacted.
So we are impacted in a different way.
But one of the things that a lot of people realize is the West Coast jet fuel comes from South Korea.
And they have stopped more than half of its exports of jet fuel to the United States because California has closed down a number of refineries.
And so that's going to impact air travel here.
And speaking of jet fuel, I mean it's affecting Europe.
Of course it's a big concern in continental Europe.
This story from Interfax news agency.
We're hearing from Russia that it's considering limiting exports of diesel and jet fuel as refinery run rates are falling there.
This is partly as a result of Ukraine's escalating attacks on refineries there.
But I mean, how big a deal could that be for global supply?
How concerned are you about jet fuel narrowly?
Oh well, I've been warning about jet fuel since the second day of the war.
Just for the fact that remember, trade takes time.
It takes weeks for this product to leave that region to get where it needs to go.
Europe, as we all know, is in one heck of a sticky situation up and down, where every country, be it from gasoline with Ireland, because they have to import it all to the jet fuel that you're seeing with the shortages in Italy.
When it comes to looking at Russia and how it quote helps the global market.
The listenership needs to realize that Russian oil is predominantly purchased by India and China.
And so that means that those two countries are going to get less.
I actually wrote a story back in April on this because Ukraine was bombing and really severely impacting the infrastructure for oil in Russia.
And it was not being reported because everybody was looking at the Strait of Hormuz.
And so I wasn't really surprised to see that announcement today, because it makes sense, because they have had to pull back already.
If you look at their export numbers, they were already down.
So it's not that you have additional... barrels going on the market, new barrels, you're not.
It's just the folks that normally buy those barrels are going to be able or will get less.
OK, Lorraine Loroco, there in New York.
Thank you very much for your thoughts there on the current state of the oil market amidst the Iran-US conflict.
You're with World Business Report from the BBC World Service.
So now let's turn to Jennifer Snyder, our regular markets guest.
We're going to talk about some of the other stories in the news.
I'm struck by this one.
We were talking about Ferrari yesterday on World Business Report.
This is, of course, the Italian luxury sports car manufacturer.
It had just launched its new EV amidst much fanfare.
Everybody seems to hate it.
Prices have fallen by 8% on the Milan Stock Exchange.
Yes, Ferrari needs to stay in its lane.
I mean with a ticker symbol like race, and we're coming out with an EV that's just not having the same bang as what Ferrari is known for.
I mean, this market reaction was brutal because Ferrari isn't supposed to follow trends.
It's supposed to define them.
And what really makes Ferrari special?
It's so coveted by those that love it.
The scarcity, the mystique.
And what we saw come out was something that was basically an Apple appliance is what I had read in some reports here.
So it's disappointing for Ferrari.
And it comes to that identity crisis sometimes.
You can't be everything for everyone, stay in your lane and be the best.
And that's what Ferrari should be doing.
Yeah.
OK, let's talk about Starbucks now, or at least specifically Starbucks in South Korea.
This is a rather a colourful story.
A billionaire whose company runs Starbucks in South Korea has publicly apologised very publicly for a controversial marketing campaign.
This, where the coffee chain had run adverts that appeared to reference a brutal massacre of pro-democracy protesters.
Now the company's chairman, Chung Yong-jin, publicly apologised for inappropriate marketing that hurt and angered many people, and he bowed his head at a press conference very publicly, and this is what he had to say.
I take it very seriously that Starbucks Korea's inappropriate marketing hurt and angered many people.
I won't make any excuse.
I will take all responsibility for the incident.
It is my fault.
All members of the group, including myself, will remember our society's history and sacrifices and always deeply understand and respect the hearts of the people.
That's one way to say sorry, isn't it Jennifer?
This is mind-blowing.
Scary part isn't the campaign.
It's that nobody stopped it.
One of the biggest things is you know when you're putting on these marketing campaigns.
Do the research, do the history understand things of that nature?
And knowing this is so huge for South Korea and that this came out, even I, you know, this...
Random person here in Rochester, New York reads this, and I'm mind blown by this.
But what I thought was really interesting is this hierarchical corporate culture.
So this whole top-down culture that they have?
Employees may have recognized this problem, but they don't challenge senior leadership.
So somebody noticed.
Somebody probably did.
They just didn't stop it.
Yeah.
OK, quick final thought, very brief if you can.
CNBC is saying that Elon Musk is considering a merger between SpaceX, which of course is floating next month, and Tesla.
What do we make of this?
Well, I think, when watching some of the reports on this, it's the 7 trillion that he needs to hit for the compensation package that is so unheard of.
And so if he merges these two companies, you start at that $3 trillion that they'll be looking at.
But that's also the big concern about valuation.
And that's the whole story behind tech.
What really is the valuation?
Jennifer Snyder, thank you very much indeed.
So a final thought now on the rising costs of fuel and fertiliser.
This is a result of the closure of the Straits of Hormuz.
That is the very noisy sound of Irish farmers protesting on the streets of Dublin last month over the price of fuel.
Farmers across Europe have been protesting this year because they say they risk going out of business because their costs are going up so fast.
EU commissioners are meeting in Brussels today to try to come up with a long-term strategy.
Europe is very dependent not just on imports of natural gas but of course Ammonia, which makes fertilisers.
And farmers have been feeling the squeeze.
Prices have been surging 40% in the last few weeks.
So what do they want from Brussels?
I've been speaking to Francie Gorman.
He's the leader of the Irish Farmers Association.
I think it's been really challenging, particularly with fertiliser prices.
And we have the remainder of the year with no anticipation of fertiliser prices are going to come back.
We want the European Union to take seriously the issue of fertiliser.
The fertiliser plan that they came out with 10 days ago will not address the issue.
It's not going to see a reduction in fertiliser prices.
I mean just to be clear.
They were talking about kind of considering stockpiling supplies for in case of future price shocks, right.
Yes, but that will have to be done at national government level.
They're mainly talking about future proofing the industry and decarbonising it through biofertiliser biomethane plants.
But that's much longer term down the road and we're not going to see that sorting the problem out in the short term.
So you want a handout right now?
We want to see the cost of fertiliser reduced by the suspension of CBAM, the suspension of DETS, the removal of anti-dumping charges,
Just to be clear, those are tariffs, what are they?
They're taxes on fertilizer.
Okay.
Yeah.
And so you want to see those kind of eliminated for the sake of the farm industry, to make life a lot cheaper for you.
I mean there is already a 387 billion euro common agricultural policy supporting the farming industry.
Some will say you're pretty well supported compared to many businesses out there right now.
I think every business is supported in different ways.
And the common agricultural policy is only a fraction of the value to farmers that it was even going back as recent as 10 years ago.
Go back 20 years ago.
The issue here around fertilizer availability is really one that's going under the radar.
And when we have ships locked up in the Straits of Hormuz, when we have difficulty in getting natural gas delivered to the likes of Morocco, where we purchase a lot of our urea from, it's going to mean that we could have a serious availability problem next year.
And if that happens you're going to have a knock-on reduction in milk production, in grass production, in yields in cereal crops.
And we can't produce our food at farm level without constant inputs of fertiliser.
And that could be a real challenge at the end of this year, early next year.
So big hikes in food prices that's what you're saying.
It will certainly have a knock-on effect with poorer people in certain parts of the world that can't produce food themselves, that you're going to see an increase in food prices and you're going to see a challenge in the availability of it as well.
Last month we had protests practically blocking downtown Dublin, didn't we, from Irish farmers.
Do you think farmers generally across the EU are going to be taken to the streets again if they don't get water from the European politicians?
The protests in Dublin initially were about fuel, the cost of fuel, but morphed into a lot more after that.
It morphed into emigration.
It morphed into cost of doing business, frustration at the inability of government to listen to the views of farmers, of business people, of small and medium enterprises that are really, really struggling with the cost of doing business.
And I think that was acknowledged finishing up by a €750 million package that the government came with.
But even still, that's not seen as enough.
So do you expect more protests?
I don't know, is the answer.
Depending on the reaction to government to this ongoing fuel cost, fertiliser costs, cost of new business increase, there may well be.
You heard it here, the forecaster of Francie Gorman.
He's the leader of the Irish Farmers Association.
We'll have to watch how European farmers in general react as the summer progresses.
That's it from us here on World Business Report.
From me, Ed Butler, and the rest of the team in Salford, thanks very much for listening.
