The 2010 oil spill in the Gulf of Mexico is worsening, and what BP will have to pay for the response is rising with no immediate end in sight. Meanwhile, the price of crude futures is rising about as fast as BP’s stock is falling. Oil futures were posting gains for the fourth straight session as traders pin their hopes on the possibility that the oil slick will muck up current levels of supply. BP stock has lost $20 billion in market value, but the company won’t need to borrow money to finance the oil spill cleanup
Oil spill in Gulf of Mexico: $8 billion hit
The oil spill in the Gulf of Mexico is causing BP stock to plummet as the disaster shows the potential to dwarf the infamous 1989 Exxon Valdez oil spill in Alaska’s Prince William Sound. The Wall Street Journal reports that BP’s stock price has lost 14 percent since the oil rig it leased exploded and sank — about $20 billion in market value. The New York Times reports that BP is also destined to take a hit on future earnings if it has to hold off on future exploration and drilling while it deals with the spill, which may cost BP at least $8 million.
Oil spill costs: Gulf of Mexico vs. Exxon Valdez
BP has said that it is spending $6 million to $7 million per day stop the oil spill in the Gulf of Mexico and limit the damage. President Obama has insisted that BP will pay for all the costs, including reimbursing federal and local governments for money spent on the response and cleanup. About 20 years ago, Exxon paid more than $3.8 billion in cleanup and damage costs, plus about $500 million in punitive damages–about $7.3 billion adjusted for inflation.
“BP certainly is more than capable of covering all of the expenses that they’ll be liable for,” said Pavel Molchanov, an analyst with Raymond James, to The New York Times. BP earned $17 billion in net income last year and is projected to earn $23 billion in 2010, according to Raymond James.
BP oil spill estimates disputed
BP’s meter is running high for the oil spill in the Gulf of Mexico. It has been reported that it will likely take months to stop a leak BP has estimated is gushing about 200,000 gallons of oil a day into the gulf. SkyTruth, an organization that promotes environmental awareness with remote sensing and digital mapping technology, says the oil spill is leaking about 1 million gallons every day. At that rate, the oil spill in the Gulf of Mexico 2010 will top the Exxon Valdez spill by the end of the day Saturday.
BP oil spill legal maneuvers
The cost of the damage to BP’s reputation that the oil spill in the Gulf of Mexico is causing will be hard to calculate as dead animals start washing up on shore with the oil. Some recent BP legal maneuvers haven’t helped. The Mobile Press-Register reported that BP was caught circulating settlement agreements among coastal Alabamians offering residents $5,000 to give up their right to sue the company for damages from the oil spill. Alabama Attorney General Troy King told BP they should stop circulating the settlement agreements.