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Main Content
Is BP Rich Enough to Bear the Financial Cost of the Oil Spill in the Gulf of Mexico?
On 20 April 2010, an explosion, followed by a fire, took place on the offshore oilrig called Deepwater Horizon, owned by Transocean, but rented by British Petroleum until 2013. Two days later, the damaged oilrig, located around 70 km away from the city of New Orleans sank to a depth of 1 500 meters, killing eleven people. The families of two missing workers immediately made formal accusations of negligence against BP and Transocean. This tragedy restarted the debate about deep sea water drilling in the United States. At the end of May, the oil leak was much more important than previously thought. BP indicated that the equivalent of 5.000 barrels of crude oil per day was then pumped from the well.
On June 16, BP finally caved in to pressure from the US president Barack Obama by creating an account where 20 billion dollars will be blocked to compensate the victims of the oil spill which is soiling the gulf. However, the American president warned that this sum, which will be funded in four years, is in no way definitely limited. Another concession was made: the British company agreed not to distribute any dividend this year. This may constitute a serious problem for British people since BP is considered a secure investment, very popular with UK private pension schemes.
According to BP, the total cost of the measures taken to face the oil spill in the Gulf of Mexico has already reached almost 3 billion dollars. For some financial analysts the total bill for BP could now reach between 40 and 45 billion dollars. The cleaning costs would be between 15 and 25 billion while the court expenses linked to the complaints could reach 15 billion. The claims for refund are dramatically increasing: BP says it has already refunded more than 41.000 complainants, for a total of 128 million dollars. Yet, the total cost of the catastrophe keeps increasing fast. BP is spending now four million dollars an hour to face the economical, environmental, and social consequences of the oil spill.
At the end of June BP’s shares fell down to their lowest level for more than 14 years. They have lost half their value since the beginning of the catastrophe, which corresponds to a loss of 100 billion dollars.
Some wonder whether BP can face this major economic and financial disaster. Others expect BP to overcome the crisis easily. In support analysts point out that this year alone the British company made a record profit of 48 billions dollars, more than Google and Apple together. This is why if need be it can always raise money on the financial markets to pay for the damages.
The financial impact of this catastrophe should warn all big petroleum companies about the risks linked to their activities and force them to take stricter safety measures, particularly when drilling in deep sea waters. Oil giants may not care much about the environment but no doubt they care about their finances. All measures they take to sustain their profits will hopefully help preserve the environment after all.