Gulf oil spill: BP faces $34bn in fines as Senate smashes estimates.
Well, that talk from David Cameron - where he warned Obama regarding his negative comments about BP - has hardly had the desired effect.
Cameron was always backing a losing horse by throwing his weight behind the company which was behind the oil spill.BP is facing a bill of up to $34bn from the Gulf of Mexico disaster after US senators demanded the oil company deposited $20bn into a ring-fenced account to meet escalating compensation costs.
The sum dwarfs many analysts' previous estimates, shared by BP, that put the cost of the clean-up effort and payment of damages to affected communities, such as fishermen, closer to a total of $5bn.
Shares in BP nose-dived by more than 9% today as investors took fright at the demand by the 54 Democratic senators, who represent a majority in the US upper house. The company is now worth almost half what it was before the accident of just under two months ago.
And, by leaking that he was telling Obama to back off from attacking BP, he was advertising that he has no leeway at all with the most powerful man in the world, because anyone could have told him that it was not in Obama's interests to back off from insisting that BP correct this historic environmental wrong.
BP already faces up to $14bn in civil penalties, payable under US environmental law, assuming the leak is plugged in August. These punitive damages are directly linked to the size of the spill – already estimated at being up to eight times worse than the Exxon Valdez disaster in 1989 – with BP liable for up to $4,300 for each barrel-worth spilt.Cameron's intervention looked foolish at the time, if for no other reason than he was backing the polluter.
Senate leaders insisted the $20bn ring-fenced account should be exclusively for "payment of economic damages and clean-up costs" and should not be seen as a cap on BP's other legal liabilities. With punitive damages pending too, the theoretical total of $34bn is equivalent to more than half the corporation tax paid by all British companies last year.
Tony Hayward, chief executive of BP, and other directors of the company, will meet Barack Obama at the White House on Wednesday prepared to offer concessions in the hope of taking the sting out of mounting political attacks on the company.
But it now looks as if he has made a big deal out of protecting BP from nasty Mr Obama, and things have only gotten worse for BP. Quite why Cameron put his neck on the line for BP remains a mystery.
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2 comments:
I'll be a but surprised if BP ends up actually paying out a lot of money into cleanup. The problem with corporate disasters on this scale is that the companies tend to have few liquid assets, and their assets in general tend to be heavily from investors. When something like this hits, the investors take out all their money fast. I wouldn't be surprised to see the company just go under, sell it's infrastructure to another, at which point the same investors will pick up stock there.
Gives whole new meaning to 'too big to fail'.
I agree, SP. It's very hard to get a large company to pay for the damage they have caused. They'll find a way out of it.
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