It is interesting to look at BP’s share price. Its above where it was last July though it has fallen markedly (by one-third) since the oil spill began in April in the Gulf of Mexico. Yesterday $11b was wiped off the value of the company as further efforts to stop the leak failed. 19,000 barrels of oil per day are pouring into the ocean in what may amount to perhaps the most significant environmental disaster in US history. At least 75 million barrels of oil have leaked so far devastating large areas of the US coastline.
The US government rhetoric is growing more fierce by the day and BP certainly deserves some blame for this catastrophe. But how much blame should be attributed to government decisions which allowed drilling to occur under such risky deep water conditions? The value of such resources is obviously immense but the risks, though small, have catastrophic effects.
Update: There are now several articles comparing the oil spill with the financial crisis in terms of private sector under-appreciation of risks creating a need for regulation. This by Kenneth Rogoff. David Leonhardt in the NYT claims that regulators have created a moral hazard problem by placing a $75m cap on oil spill damage costs. The likelihood is that offshore drilling for the small amount of oil available offshore will be banned for decades. Regulatory underprovisions lead to possible over-regulation longer-term.
Update: (3/6) BP’s shareprice continues to tumble but still surprisingly above its level at start 2009. Analysts are now questioning the firm’s future with many making the (to me always surprising observation) that if the share price continues to tumble BP will become a takeover target. It’s a claim that doesn’t make much sense unless you are trying to put a floor under the price.
Update: 11/6. The share price has collapsed now falling to its lowest level since 1996. Estimated damage claims are now put at $33 billion. (1002)