Financial Repercussions for BP Oil Leader Over Drilling Spill Disaster
While the economic consequences of the Gulf Coast oil spill disaster are just about as uncertain as the extent of environmental repercussions, oil leader BP PLC’s reputation may experience an even greater blow than the company’s wallet.
The Gulf Coast oil rig spill occurred on April 20, 2010, but we are only seeing the beginning of its affects. BP may potentially pay hundreds upon hundreds of millions of dollars to cover damages and monetary losses, not to mention providing compensation in class-action lawsuits and various other liability claims that have already begun to mount. Some of these cases pertain to commercial fisherman, charter boat captains, resort management companies, individual property owners and injured oil workers throughout Louisiana, Florida, Mississippi and Alabama.
While no business ever expects to encounter such a catastrophe associated with their company, large corporations and partnerships must be prepared to handle far-reaching circumstances that have the potential to influence millions of people. The oil industry is one that supplies our economy significantly, yet what effective preventative measures and regulations are in place to help prevent such serious oil spills from happening?
According to a NY Times article discussing the financial impact of the spill for BP, the 1989 oil spill off Alaska cost Exxon Mobil over $4.3 billion, which included clean-up expenses, compensatory payments, settlements and fines. With the staggering costs of the 1989 spill in mind and considering that some experts are referring to the current Gulf Coast spill as the biggest oil disaster in history, BP is likely to experience significant financial loss. The article alludes to $6 million a day being spent by BP towards the oil spill disaster. The company has also stated that costs to drill and work on relief wells to plug the runaway alone could amount to as much as $300 million; however, BP is hoping that the same wells will be used at some point to produce lucrative oil supply.
Under federal law, the oil company holds responsibility for paying the costs of response to the oil spill and clean-up procedures, although help has been provided by a wide range of government agencies. With BP so far being unable to stop the oil seepage from the deepwater well, how they continue to exercise their efforts in terms of effectiveness, time, and quality will influence future business endeavors and other financial matters.
