The new estimate is 25,000 to 30,000 barrels of oil a day. That range, still preliminary, is far above the previous estimate of 12,000 to 19,000 barrels a day.
With the estimated damages growing ever higher, this is disturbing:
Administration officials suggested that they had no immediate plans to directly block BP from paying the dividend, even as the White House and its allies made clear that they would pressure the company to ensure that it made paying spill-related claims its top financial priority.
If the debt of BP is now reflecting junk bond status, the government as a potential creditor needs to step in unless it is willing to do what Congressman Boehner and Tom Donohue (Chamber of Commerce) were recommending – have the taxpayers foot part of the bill for this mess.
On a related note - Mark Thoma offers some insights into the debate over regulation especially under a system of rules where companies such as BP might be shielded from much of the downside risks its activities create.
Update: BP stock price has gone up in the two days since the release of the news that the estimated amount of oil being leaked into the Gulf is much higher. So what other news would have offset what one would think to be really bad news? Have the chances that BP can keep its share of the costs from this disaster low gone up for some reason?
There is a very bizarre aspect of this that is increasingly popping up. It is that while it is this great big oil major, there are limits to the financial pockets of BP, which are ultimately the financial pockets of its stockholders. And, while there certainly are many wealthy stockholders, including the British royal family big time, this very British company that was majority owned by the British government itself for over 60 years, has lots of British institutions such as pension funds that are its owners, with the latest figure I have seen being that something like 1/7 of the pension income for British retirees is coming from BP stocks. Ooops!
ReplyDeleteSo, now we have a diplomatic problem on our hands. Lots of British retirees do not like the idea that they are facing income cuts because of some messup in the Gulf of Mexico. This was supposed to be something Very Safe, and they weren't making these decisions. And as the value of the stock declines, the ability of BP to finance any cleanup declines, with the ultimate threat being that BP can simply pull the financial plug and declare bankruptcy if the financial pressure becomes too great.
No, I do not have an easy answer to this particularly nasty conundrum. I just note that in the end a lot of people will be paying for this, with unclear who all they will be, but with many of them feeling unhappy about it and feeling like they do not deserve having to do so, whether it is BP owners or taxpayers in the US or whomever.
Is there some UK version of the Cato institute telling working people with funds in the financial market to be used for retirement income that stocks are a safe asset with high returns? I know we used to hear this kind of silliness in the Us but then we got Enron, Worldcom, etc. Of course, the fact that the CEO keeps saying that the damages are limited strikes me as deluding his own shareholders. Which under SEC rules could lead to a shareholder lawsuit. Nasty stuff!
ReplyDeleteHere's a puzzle. At close of business on Wednesday, BP stock prices were near $28. This story of how the the amount of oil being leaked may be much higher than earlier estimates comes out yesterday and today the stock is trading near $34. So what news came out that overshadowed this bad news?
ReplyDeletepgl,
ReplyDeleteI don't know the answer to your last question, and what goes on in the stock market, well. I do not think that the attitudes there have anything to do with any sort of equivalent of the Cato Institute. I think deeper history is involved here, some of which can easily make me and I suspect many others not at all sympathetic with BP, although I may be more sympathetic with the more gullible and naive among the older pensioneering stockholders.
So, BP is one of the world's oldest major oil companies, its roots dating back to the D'Arcy oil concession given to Britain by then Persia, with the company's original name being the Anglo-Persian Oil Company (APOC). It was by far the main British oil company, operating in Baku before its assets were seized in the Russian Revolution (Russia, mostly in Azerbaijan next to Persia, was the world's top oil producing country in the first decade of thr 20th century, the overwhelming majority of that by APOC).
Churchill nationalized it in 1917 to gurantee an oil supply for the British navy during WW I, and this was only gradually undone later in the 1980s under Thatcher. It changed its name in 1935 to the Anglo-Iranian Oil Company when Persia changed its name to Iran to play along with the Aryan master race fantasies of the Shah's buddy, Adolf Hitler.
The company's assets in Iran were nationalized under Mossadegh in the early 1950s, and the coup organized by the US and Kermit Roosevelt, Project Ajax, was mostly to restore its rights, although part of the deal for bringing back the Shah was to get some of the US oil companies in there as well, especially some of the US minors that had been kept out of the Middle East up until then. Even today, it is my understanding that because of the British government ownership then, parts of that operation remain secret under the UK Official Secrets Act.
Anyway, I suspect that for many Brits, BP is sort of like what Ma Bell used to be in the US, the ultimate safe company to invest in, something for one's grandmother, especially given its link to Queen and Country, blah blah blah. We can laugh at these people for their pathetic naivete, but it is really kind of sad at some ultimate level, or might be. Guess we shall have to see.
However, I have no use whatsoever for the BP management, which has been shown to be a serial violater of safety and environmental regs. They should taken out and thrown into that mess in the Gulf themselves bodily.
rosserjb: "there are limits to the financial pockets of BP, which are ultimately the financial pockets of its stockholders."
ReplyDeleteBP is not a limited liability corporation?