The Fate of British Petroleum and the Oil Industry

On April 20, 2010, British Petroleum [BP:NYSE] informed the world that it had a small oil leak from an oil rig settled in the Gulf of Mexico. BP stated that 1,000 barrels per day was lost due to the explosion, but later admitted that the government's estimate of 5,000 barrels per day was much more accurate. Unfortunately, both BP and the US Federal Government was wrong, as recent studies show that over 100,000 barrels of oil are lost in a single day.

Many now accept that this oil spill has usurped the Exxon Valdez disaster as the biggest man-made natural disaster in human history. As well, estimates now put this oil leak as the largest oil spill in the world, passing the Iraq oil spill during the Iraq War in 1991 [1]. It's reign as number one will continue to live on if BP can not stop the leak. Attempts to halt the leak has failed on numerous occasions and may continue through the entire summer, prompting many to question what will happen if hurricane season hits early or harder than usual.

Shares in BP plummeted in the month of May; the first day of June has not been any better. Yesterday, BP announced that clean-up costs is nearing $1 billion US, sending shock waves across the globe. The company's market value decreased 15 per cent just today as investor's consider how much damage the company has inflicted on itself and the environment.

And now, speculations are swirling that British Petroleum's existence is in peril as its low share price is attractive as a takeover target. It also doesn't help that its reputation has been tainted for a few decades, and it has lost million, if not billions, in future oil revenue literally being washed away.

Bankruptcy is a tad absurd, but recent estimates by a Raymond James analysts see costs to spiral to $5.2 billion in 2010, up from a previous estimate of just $1.6 [2]. To put that into perspective, the company netted over $18 billion in 2010.

What this disaster has done has put drilling in the spot light. The realization that we need safe drilling has come to the forefront and expect many countries to implement new operating procedures and how we clean up oil spills.

A recent video has also been popularized on YouTube courtesy of this disaster, and I hope to make it viral. A non-profit organization named Matter of Trust has come up with an ingenious solution to oil spills: hair. View the video and ask your local salons to make a donation by simply mailing in boxes of hair they would normally throw out.