The Dangers of a Weakened BP

As I said in this recent post, in theory BP should have more than enough cash to pay for the environmental cleanup and compensation claims resulting from the Macondo well disaster.  But as I went on to say in this post, the manner in which the US government is hounding the company is sending their share price – and hence market capitalisation – into steep decline.

The Obama adminstration is swimming in very dangerous waters here.  The absolute priority must be to stop the leak from the well, followed very closely by cleaning up the damage and settling compensation claims.  It is much more desirable that a healthy, profitable company is in the position to do these things than one whose very survival looks to be in doubt.  But Obama and his chums seem more interested in sending BP into bankrupcy in order for them to look politically tough, and this is stupid in the extreme.  If the decline in BP’s share price continues with more vindictive outbursts from the White House, there will come a point where the BP shareholders will decide that the aforementioned priorities should shift.  If it starts to look like the company is facing an existential crisis, the shareholders are quickly going to try to save what they can and to hell with the cleanup and compensation claims.  What will they have to lose if the US government is determined to see their investment reduced to zero anyway?

Once again I am indebted to The Hayride for posting the contents of this letter, which suggests politicians in Louisiana have similar concerns:

“It appears that the plan of the state and the federal government to stop the Deepwater Horizon oil leak, remediate its effects and compensate Louisiana citizens damaged by the leak is predicated on BP’s ability to pay for these objectives. I write because I am concerned about the solvency of BP. More specifically, I am concerned about the possibility that BP will seek the protection of the United States bankruptcy laws. A Chapter 11 filing by BP North America, a fully owned subsidiary of BP plc, could be used to protect the company from its creditors, including the United States government, the State of Louisiana, other states and individuals and businesses damaged by BP.”

– Louisiana state treasurer John Kennedy, in a letter to Gov. Bobby Jindal

How low will the share price have to go before the shareholders accept that BP in the USA is finished for good and they might as well cut bait and run?  If the US government keeps going the way they are, we might just find out.


13 thoughts on “The Dangers of a Weakened BP

  1. “Floodwaters … tore through a campground packed with vacationing families early yesterday…. At least 16 people were killed, and dozens more missing and feared dead.” That’s more than the number who died on the oil rig. I trust that O will now invade Arkansas, or at least put a boot on its throat and kick its ass – surely the Chosen One can do these things simultaneously?

  2. dearieme: you know it’s not the same thing.
    in one case the disaster was preventable – in fact, there were whole departments and scientists and manuals and consilium of engineers to ensure something like this will not happen: and the rules and recommendations were ignored and quite possibly deliberately. it was a man-made disaster.
    in the other it was a force of nature. or even if predictable, in broad sense, people who got killed or injured have nobody else to blame but themselves, for not evaluating the scope of coming danger.

  3. I’m not arguing that it’s the same thing – I am pointing to the selectivity with which a dozen or so deaths are mourned. In one case, a shrug; in the other, weeks of inactivity (or even obstruction) by the Federal government, followed by calculated coarseness and the whipping up of hysteria.

    In one case, the excitable among us could have blamed meteorologists for failing to give warnings, but if they have done so the fuss hasn’t crossed my radar. In the other case, much ink spilled based largely on intelligent surmise at best, and malevolent stupidity at worst. And all the time, your President achieving the near-impossiblity of looking like as big a liability as W.

    There must still be in the USA many engineers, geologists and geophysicists who are capable of saying grown-up things about this business. Perhaps their voices are being drowned out by the shrill screamers.

  4. funny, dearieme, for all your reading of American blogs (for decades, it seems!) you call W a liability and even hint Obama is a lesser one. I’d say “clueless” if I was not raised to be respectful of old age.

    to hear distinct voices in cacophony one must be able to differentiate.
    apparently for you there is no difference between as act of Nature (on which normal reaction is “what’ya gonna do? life is a bitch”) and a highly probable event that specially trained and paid for their expertise people were obligated to prevent.
    it should be obvious, to anyone who reads libertarian American blogs (and I know you do, I’ve seen you there), who are the shrill screamers and what are their motives for screaming. hint: incompetent bunch of technically-challenged professional chatterers who are in charge of the country now; exactly because they can’t hang it all on Bush anymore (whom you inexplicably detest), and are faced with responsibility they can’t handle.
    engineers certainly are not silent (read, f.i., comments by Gringo on Tim’s previous threads) – they just not the chattering types. but even w/o engineers there are plenty of people who dislike the nationalistic bashing originating from WH. See, f.ex., this thread @Breitbart – but I’m sure you have seen it or many similar ones before. it’s just much more self-gratifying to mope and blame a whole nation – whom you just professed @Chicagoboyz to know so well!

    I can only imagine how livid British reaction would be if the same story happened somewhere near East Anglia’ cost, and the company at the center of incident was a nominally American one.

  5. “I can only imagine how livid British reaction would be if the same story happened somewhere near East Anglia cost”: Piper Alpha, Tatanya, Piper Alpha.

  6. It’s Tatyana, if you don’t mind.

    That’s not enough to say the magic words, *dearieme.
    Tell me – was there an oil leak after the explosion @Piper Alpha? Was it repaired and how soon? By whom? How big was an environmental damage? What was the reaction of British public and government?

    I gather everything else I said you have no comment to. Fine.

  7. Amoco Cadiz. Bhopal.

    There’s no denying that the worst conceivable outcome of the present business would be gruesomely bad, but your Federal government at the moment seems to be combining hysteria, incompetence and xenophobia, as if they were a bunch of redneck schoolgirls. Perhaps it’s hoping that everyone will overlook its recent policy of encouraging offshore drilling?

  8. you should recognize xenophobia easy enough.

    judging by your own “wide brush” that you painted all Americans with.

  9. “There must still be in the USA many engineers, geologists and geophysicists who are capable of saying grown-up things about this business”: all Americans?

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