Oil major BP (BP.L: Quote) believes it may be heading for a showdown with the White House over ever- increasing demands that it cover costs related to the oil spill in the Gulf of Mexico, a BP source said on Wednesday.
“At some point a line has to be drawn,” the source said.
I concur with BP on this one, unless they get veto power over the moratorium.
So they say BP’s oil spill might wreck the Gulf Coast economy. In today’s Washington, doesn’t that qualify you for a bailout?
Like the old sign in the shop says… “You break it, you own it.” BP needs to break out the check book.
As a followup to my previous, I do think the Feds need to be careful not to overplay their hand. Sidney in his #1 is correct and I think the new demands are pushing the envelope. The Feds really don’t need to go there anyway. BP is facing staggering civil fines without even beginning to calculate the legitimate economic damages. And then of course there is a criminal investigation.
BP’s legitimate damages are going to run into the tens of billions of dollars. There is no need to go off trying to pad the bill with something that in monetary terms is as petty as this.
BP is the world’s biggest company and in the normal course of things, even with the enormous costs of the spill and cleanup, it should be able to cover those costs and survive. It is right that it should do so including the tragic losses of lives, livelyhoods and environmental damage in full.
However it is also right that it should be able in the normal course of these things to also have the right to recover and allocate those costs between itself and the two US companies, Transocean and Haliburton who owned the rig and capped the well.
Instead what is happening is that there seems to be an American hatchet job going on from the Administration and Congress to destabilise the company in that very American way which is adversely affecting BP and its shareholders which includes many of our pension funds. The price of the company’s shares is plummeting making it liable to a hostile takeover and asset strip, and its ability to fund its operations in the markets is being deliberately destabilised by a number of people keen to make sure that none of the mud comes their way. If shares do not pay dividends, the market will rank them accordingly.
The deliberate leaking of selected information from Congressional investigators and increasingly outlandish claims for what is in reality a political decision not to use US oil reserves in deep water will produce a reaction here including consideration of the increasing expenses we are being asked to pay in support of US troops in Afghanistan which are costing us deeply both in young lives and in finances. This is the second conflict recently where we have done so.
That together with interfering with the Falklands is not going down well, and the US does not have so many friends that it can afford to alienate yet another.
Just to put the damage in perspective:
Current expenditure on cleanup: around £1 Bn
Current total expected cost of cleanup: £20 Bn
Loss in value of BP shares with American tub-thumping £49 Bn [40%]
That is with the current Administration putting the boot into BP a loss of double the likely cleanup cost, and it is getting worse. Be careful what you wish for.
And it is the same attitude of insular arrogance we see from the American church – and too hell with the consequences for anybody else seems to be the way it works.
Supporting the US in Iraq and Afghanistan has cost us at least £20 Bn in both operations and almost 300 lives just in Afghanistan. I am not sure of the cost of British lives in the Gulf wars and post war occupation. Now the operations were also in our interests, but perhaps it is worth remembering the perspective in all this.
I had much rather any civil fines be diverted into damage payments. Fines just line government pockets.
Hey, the business of government is business. The rest of us get screwed. Bailing BP is akin to a psychologist having sex with his patient then charging her for the privilege – sort of like what we began to do three years ago when we bailed out all the Wall Street firms so the bright lights which brought us the economic disaster we now face could collect their bonuses.
So under the provisions set forth in the Old Testament – what would be the proper sanction and settlement for BP to pay for its damages? For example, Exodus 22:4: “If a man cause a field or vineyard to be eaten, and shall let his beast loose, and it feed in another man’s field; of the best of his own field, and of the best of his own vineyard, shall he make restitution.”
As much as it costs to restore the status quo anti.
A few quick points….
1. BP has assets of well over $100B which are not affected by the share price. So they should be able to cover the bill for this.
2. Given the current situation and the amount of pending litigation no court here or abroad would likely permit any hostile takeover of BP and certainly would not allow any attempt to remove or “strip” assets before litigation is resolved.
3. Expenses are likely to be steep but BP’s survival is not generally regarded to be in danger. Incredibly many analysts are actually upgrading their outlook on BP stock to a “buy” on the grounds that it is oversold at present and something of a steal at its current price.
#11 Ad Orientem
1. No doubt BP has assets of $100Bn, but if they are not liquid, that is of no more help than the assets of the government of Dubai found.
2. BP is a British quoted company. I am not sure what provisions you think could stop a takeover bid, unless under monopolies provisions. Whatever the asset base, if the share price is low enough, it will attract hostile bids, and if anything the higher the underlying assets the more attractive this would be.
3. The expenses are not the problem, it is the undermining of the credibility and share price of BP that is the problem.
#9 “So under the provisions set forth in the Old Testament – what would be the proper sanction and settlement for BP to pay for its damages?”
Interesting question, but the liability of BP is determined by US law as it exists today and the right of anybody to determine their rights in US courts, including in relation to Transocean and Haliburton. It is not something to be made up as you go along. That is called the rule of law.
So is it too much to hope for some ratcheting down of the rhetoric from the US administration and congress?