BP = Beyond Pollution?

British Petroleum has recently come under fire for an oil spill in the Gulf of Mexico. BP, Deepwater Horizon, and Halliburton have also been accused of wrong-doing in the case of the BP spill. The spill started at 9:45 P.M. April 20, 2010 and will continue to spew out oil. At first the oil rig caught fire killing 11 employees. At first BP stated that they believed 5,000 barrels of oil per day were spilling but then later revised that number to 100,000 barrels per day. With the current price of a barrel of oil around $66 the company is losing $6.6 million per day on just the oil alone. This figure doesn’t include the clean-up costs, lawsuits, and other expenses related to the spill. BP claims that the cost per day to clean up the spill is around $10 million. What seems clear is that some party is at fault for the spill. BP, Deepwater, Halliburton or a combination of all three could be at fault for the accident. However, it might be hard for some people to understand that perhaps no one party cause the spill it could be shared among all these companies and maybe other contractors that worked on the rig. Obviously these companies didn’t want the spill to occur since they would lose their reputation which is worth billions of dollars. The companies involved have been hurt dramatically since the spill. As of today, BP is down close to 27% since the oil spill started. Halliburton has been down 17% since the spill started. These stocks could still continue to go down since the market does not know what the true liability for these companies are. Exxon had a spill in 1989 that took many months to clean up. The difference however was that Exxon Valdez ship only had so much oil as opposed to a rig that can keep spilling oil until it gets fixed. The plaintiffs that sued Exxon in 1989 didn’t receive their final judgment until June 15, 2009 nearly 20 years after the spill occurred! Not only did it take a long time the judgment was decreased from $5 billion to $507.5 million. I believe a similar situation will happen with the BP case since the company will voluntarily put in billions to clean up and have to deal with lawsuits. Should the government get involved in oil spills? I think the answer is somewhat of a yes since an oil spill does impose an externality onto the environment and the people. We have courts to dispute torts (wrongs against people). Not only can this but the no amount of regulation can make up for the loss of reputation of the firms involved in the spill. Also why were these rigs so far off shore? Was it because of regulations or just because it would have been easier to find oil? In addition to this, why don’t we have more above grounds rigs? At least if the rig is above round than it is easy to fix the spill. Drilling for oil is not an easy thing and risks are always involved. To say we should drill less or just not drill at all assumes people would be willing to pay European prices for gasoline. More drilling will result in fewer spills since people will become more experienced in figuring out what problems might arise or what could go wrong. This spill will make future oil spills less likely since companies will spend money on preventing oil spills or by making sure that if a spill occurs they have the resources to take care of it. People in Washington D.C. don’t agree with this logic and simply want to create new regulations which will increase cost not only to oil drillers but also to consumers since companies pass on costs. Perhaps less regulation would have not caused the BP spill. Time will only tell as to what the ramifications are of the spill, what parties were affected, and how things will be done differently in the future. However, it is a really good time to be a litigation lawyer or a fisherman in the Gulf Coastal area.