BP Oil Rig Disaster – can we ever count the cost?

The April 20^th sinking of British Petroleum’s Deepwater Horizon oil rig 41 miles off the Louisiana coast could have an impact of up to $2B on various global insurance markets, according to Liberty International Underwriters.

But according to some projections, the total financial hit is approaching $14B.  And growing.

The magnitude of the threat continues to escalate daily as Louisiana, Mississippi, Alabama and Florida are all threatened with coastal destruction.

Although US President Obama has indicated that BP will be responsible for all losses, remediation won’t be simple, it won’t be quick, and it will never be complete.

Consider:

• a US Interior Department review of the Gulf of Mexico drilling operations chose in April 2009 to exempt BP’s site from a detailed impact analysis after it concluded that a massive oil spill was unlikely.
• in the wake of the Exxon Valdez disaster, the US Federal Government passed the Oil Pollution Act of 1990 capping liability for economic damage (lost wages, dwindling revenue in tourism or fishing) to $75M.  To put that into context, some estimates put the economic impact to the fishery at $2.5B and to tourism at up to $3B.
• the disabled rig could now be discharging up to 1 million US gallons of crude per day.  After 2 weeks of uncontrolled emission, total clean-up is now deemed nearly impossible.  (By comparison, the Exxon Valdez spill totaled 10.8 million US gallons in March 1989.)
• legal claims for injuries and death to the rig workers have already been filed in various jurisdictions.
• an April 30^th Merrill Lynch report estimated a $21B reduction in market capitalization for BP, and 4 other connected entities.

And the costs continue to mount – costs that in some way, will be borne by us all.