Oil prices rallied yesterday as BP revealed the huge damage the rout in the price has done to its business, which crashed into the red by $1 billion (€870 million) in the final quarter of last year.

The oil major has written down $3.6 billion (€3.1 billion) of assets and is slashing its capital expenditure budget for 2015 by up to $6 billion, taking it down to $20 billion.

One factor behind the bounce in the crude price in recent days is the flood of similar spending cutbacks announced by the global oil industry, cuts that will reduce output and, in time, push prices higher.

Some analysts say a recovery is now in sight after the dramatic halving of prices from more than $100 a barrel last summer.

But there was little optimism on that front from BP chief executive Bob Dudley yesterday. As he took the axe to the group's spending plans, the BP chief warned it would be "a long time" before we saw $100 a barrel oil again.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” he told shareholders.

The focus had to be on “resetting BP” for what Dudley called the “new reality of lower prices”.

It's not the first time BP has been forced to reset its business and the scars of the last seismic event – the Deepwater Horizon oil spill – are still clearly visible in its results. The group took an additional charge of almost $500 million in the final quarter last year, taking the total cost of the Gulf of Mexico disaster, in which 11 people lost their lives, to $43.5 billion.

Further retrenchment

After Deepwater five years ago, BP embarked on a huge sell-off of assets to help meet its liabilities for the disaster. Now the oil price crash is forcing further retrenchment, as spending is cut back, marginal projects are mothballed and assets written down.

BP is not alone – rival BG has been forced into an even more drastic write down in the value of its oil and gas assets, largely in Australia, of almost $9 billion.

Its losses for the final quarter of 2014 were a hefty $5 billion and capital expenditure is being slashed by 30 per cent this year, to about $6 billion.

Both groups are cutting jobs and BP last month imposed a pay freeze on its 84,000-strong global workforce, which includes 15,000 in the UK.

In Aberdeen, dubbed the oil capital of Europe and the centre of BP’s extensive North Sea operations, it has recently announced that 300 jobs will go. Further job losses are undoubtedly on the way.

Oil & Gas UK has warned that up to 100 fields in the North Sea are in danger of closing because of the plunge in the oil price.

The lobby group is calling on the British government to slash the top rate of tax on North Sea fields from its current 80 per cent to 30 per cent in an effort to provide some relief to the producers and to protect jobs.

Chancellor George Osborne made concessions to the oil industry in last year’s autumn statement and appears minded to provide further help in the March budget.

But then he has been one of the main beneficiaries of the lower oil price, which is fuelling economic growth and reducing inflation through lower petrol prices and falling household energy bills.

That’s always a handy combination for a chancellor in the run-up to an election. * * * * * In the 1850s, teetotal sailors were charged more for their life assurance than their rum- drinking shipmates because of the belief by insurance companies that drinking alcohol was safer than drinking the diseased water of the time.

Non

drinking seafarers But teetotal

Robert Warner realised that the long-term benefits of abstaining from alcohol would outweigh the risks of drinking water and began to offer reduced premiums to nondrinking seafarers.

His UK Temperance and General Provident Association became the Marine & General Mutual Life Assurance Society, founded in 1852 and now Britain's oldest surviving registered company.

M&GM – some of whose early policyholders sailed on the Titanic – is now giving up its independence after agreeing a takeover from the acquisitive mutual firm Scottish Friendly.

It is Scottish Friendly’s biggest deal to date and will double its funds under management to about £2 billion. No price is being disclosed for the deal, which must be agreed by the policyholders of both mutuals.

Along with the takeover goes M&GM's historic registration number – 00000006. The other five companies no longer exist. Fiona Walsh is business editor of theguardian.com