The Aftermath of Doubled Oil Spill Estimates

One Exxon-Valdez every 8 to 10 days

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Experts now estimate that 25,000 to 30,000 barrels worth of oil are spewing into the Gulf of Mexico every day. That's double the previous estimate and, as has been noted by many pundits, many times BP's initial estimate of 1,000 barrels per day. There are 42 gallons in every barrel worth of oil, meaning that over one million gallons of oil are entering the Gulf daily; that's the equivalent of one Exxon-Valdez every eight to 10 days. What does this mean for the environment, for the politics of the oil spill, and for BP?

  • Ammo Against BP, Especially for White House The New York Times' Justin Gillis writes, "The new numbers are certain to ratchet up the already intense political pressure on BP." Chiefly it will strengthen the case that BP should stop paying dividends on its stock until it demonstrates that it will pay off all costs for cleanup. "The higher estimates will affect not only assessments of how much environmental damage the spill has done but also how much BP might eventually pay to clean up the mess."
  • Financial Disaster for BP The Agence France-Presse reports that the announcement "rounded off a miserable day for BP in which its share price plummeted almost 16 percent in early London trading before finishing at its lowest level since 1997. Investors fled for fear Obama intends to exact a heavy price from the British energy giant as its potential liability soars and US officials look to suspend prized shareholder dividends until compensation is paid. Although it later recouped most of its loss, BP's share price has collapsed more than 40 percent -- wiping tens of billions of dollars off its market value -- since the Deepwater Horizon rig sank on April 22."
  • Why the Initially Low Estimates? The Washington Post's Joel Achenbach wonders, "the higher figures call into question the circumstances that led to the much lower estimates of the spill early in the crisis. On April 28, after having received estimates of the size of the spill from BP and the National Oceanic and Atmospheric Administration, the Coast Guard announced the 5,000-barrels-a-day estimate. Not until May 27 did the flow rate group increase the estimate to 12,000 to 25,000 barrels." He adds, "This remains an inexact science, fraught with guesswork, with the well constantly burping gas amid the dark crude, and water and sediment thrown in to make it all the more complicated."
  • It's Only Going to Get Worse Rolling Stone's Tim Dickinson reports, "A source privy to internal discussions at one of the world's top oil companies confirms that the industry privately agrees with [higher-end] estimates. 'The industry definitely believes the higher-end values,' the source says. 'That's accurate - if not more than that.' The reason, he adds, is that BP appears to have unleashed one of the 10 most productive wells in the Gulf. 'BP screwed up a really big, big find,' the source says. 'And if they can't cap this, it's not going to blow itself out anytime soon.'"
  • Could BP File for Bankruptcy? That would get them out of paying for the clean-up. The New York Times' Andrew Ross Sorkin worries, "The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees)."
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