Economic and political consequences of the Deepwater Horizon disaster
This article covers the effect of the Deepwater Horizon disaster and resulting oil spill on global and national economies and the energy industry.
Weeks after the event, and while it was still in progress, the 2010 Deepwater Horizon oil spill was being discussed as a disaster with far reaching consequences sufficient to impact global economies, marketplaces and policies. These potentially included structural shifts to energy policy, insurance marketplaces and risk assessment, and potential liabilities of the order of tens of billions of US dollars for one or more large and well known companies - principally BP.
Impact by marketplace and policy area
Energy policy effects
A recently announced policy to extend deep water drilling was placed on hold and a switch to other sources of energy had been discussed in some quarters.
Global insurance and reinsurance market impact
At the time of the disaster it was said that there were only 3 companies able to insure risks of such size.[1] The impact of Deepwater Horizon on insurance, reinsurance and other global markets due to the shift in systemic risk is as yet unknown. Until this incident loss of an entire semi-submersible rig in this way was considered "an unprecedented tragedy" [1] with an underwriter at Pritchard Capital commenting "It's never happened that a semi could burn into the sea and completely sink. Now underwriters have to include that as a risk. That’s probably $10,000 to $15,000 more per day in rig insurance. They’ll make it up by charging more on a per-rig basis." [1]
Oil industry impact
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Gulf of Mexico fishing and tourism impact
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Environmental impact
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Impact on the US economy
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Impact on BP and the UK economy
BP - at the time the United Kingdom's largest corporation[2] and a major business in the UK investment world - came under intense popular, media, and political pressure to cancel its 2010 dividends in their entirety.[3] Media reports state that BP is of such a size and significance in that country, that "one pound in every seven" of investment and pension fund income in the UK is derived from BP.[4] Local media offered views on what this might mean for citizens.[5] As BP was reported to be "offloading billions of dollars in assets" in preparation,[6] some estimates suggested the total liability could amount to as much as US $100 billion (UK £67.5 bn) by the conclusion of the disaster.[7] Financial analysts commented that BP was capable of addressing the potential liabilities that might result, and BP stock rose slightly on the news that the initial US $20 billion compensation fund had been agreed.[6]
Political and foreign relations impact
The disaster was seen by some as placing stress on US-UK relationships, insofar as BP is a British company. Both US President Barack Obama and UK Prime Minister David Cameron were under considerable pressure to comment politically on the matter.[4][8][9] Insurance Times reported an open letter from the Chairman of RSA Insurance Group, "the head of one of the country's leading companies",[10] to President Obama (text of letter) that expressed a concern over "double standards" compared to the sub-prime based banking crisis of 2007–2010 and over "prejudicial and personal" comments in the media.[11][10] Boris Johnson, the mayor of London, was also reported to have made a similar comment,[10][2] and similar concerns related to the tenor of media releases were also expressed by Labour MP and ex-Parliamentary Secretary Tom Watson,[2] Vince Cable the Business Secretary,[2] and the UK Foreign Office.[2] The Department of State stated that the issue will not affect US-UK relationships, calling the UK its "closest ally".[10] Cameron stated that "sensible dialog" was needed[12] and BP would require certainty over its liability for compensation.[13] Obama was later reported to have said that "his frustration over the mammoth oil spill in the Gulf of Mexico is not an attack on Britain" and that he had "no interest in undermining BP's value", as the two leaders tried to soothe trans-Atlantic tensions over the disaster.[14]
References
- ↑ 1.0 1.1 1.2 Gunter, Ford (2010-04-28). "An Explosive Situation". Portfolio.com. http://www.portfolio.com/business-news/2010/04/28/the-explosion-of-deepwater-horizon-oil-rig-could-have-disastrous-business-consequences. Retrieved 2010-06-17.
- ↑ 2.0 2.1 2.2 2.3 2.4 Louise Armitstead, Myra Butterworth and Alastair Jamieson (2010-06-10). "BP oil spill: shares plummet as US warns it will 'take action' to stop dividend". The Telegraph. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7816593/BP-oil-spill-shares-plummet-as-US-warns-it-will-take-action-to-stop-dividend.html. Retrieved 2010-06-18.
- ↑ Mike Memoli and Peter Nicholas (2010-06-16). "BP agrees to $20-billion escrow fund; cancels dividends". Los Angeles Times. http://articles.latimes.com/2010/jun/16/nation/la-naw-obama-bp-dividend-20100617. Retrieved 2010-06-18.
- ↑ 4.0 4.1 "BP shares tumble on dividend fears". Yahoo Finance / AFP Business News. 2010-06-18. http://au.biz.yahoo.com/100609/33/2dj5g.html. Retrieved 2010-06-10.
- ↑ "BP crisis: The impact on your savings and investments". BBC News. 2010-06-17. http://news.bbc.co.uk/1/hi/business/10293829.stm. Retrieved 2010-06-18.
- ↑ 6.0 6.1 Beatty, Andrew (2010-06-17). "BP readies war chest as spill costs mount". AFP. http://www.google.com/hostednews/afp/article/ALeqM5jSmfOlsrJbkjBAoVHTkBsDKE0g3w. Retrieved 2010-06-18.
- ↑ Spillius, Andrew (2010-06-18). "BP oil spill could cost $100bn". The Telegraph. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7836982/BP-oil-spill-could-cost-100bn.html. Retrieved 2010-06-18.
- ↑ Saunders, Doug (2010-06-18). "British taking U.S. fury at BP personally". The Globe and Mail. http://www.theglobeandmail.com/news/world/british-taking-us-fury-at-bp-personally/article1608378/. Retrieved 2010-06-18.
- ↑ Kirkup, James (2010-06-16). "Oil spill: David Cameron confronts Barack Obama in battle to protect BP". The Telegraph. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7834242/Oil-spill-David-Cameron-confronts-Barack-Obama-in-battle-to-protect-BP.html. Retrieved 2010-06-18.
- ↑ 10.0 10.1 10.2 10.3 Pearse, Damien (2010-06-11). "'Anti-British' Obama Attacked Over BP". Sky News. http://news.sky.com/skynews/Home/UK-News/Barack-Obama-RSA-Chief-John-Napier-Accuses-President-Of-Being-Anti-British-For-His-Attack-On-BP/Article/201006215647312?f=rss. Retrieved 2010-06-18.
- ↑ "RSA’s Napier attacks Obama: US President’s attack on BP is "prejudicial and personal"". Insurance Times. 2010-06-11. http://www.insurancetimes.co.uk/story.asp?sectioncode=13&storycode=384889.
- ↑ "Cameron urges 'sensible dialogue' on BP spill". AFP. 2010-06-17. http://www.google.com/hostednews/afp/article/ALeqM5ixKAAPYTn5FJPVPFlZ5bzhFhiJ5g. Retrieved 2010-06-18.
- ↑ Hutton, Robert (2010-06-16). "Cameron Says BP Needs Level of Certainty Over Claims (Update1)". Bloomberg BusinessWeek. http://www.businessweek.com/news/2010-06-16/cameron-says-bp-needs-level-of-certainty-over-claims-update1-.html. Retrieved 2010-06-18.
- ↑ Lawless, Jill (2010-06-12). "Obama tells Britain no hard feelings over spill". Associated Press. http://www.google.com/hostednews/ap/article/ALeqM5gWex3tV4QpJTdP2ea1byEXbTTQrQD9G9RPMO0. Retrieved 2010-06-18.
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