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Why BP suspended the dividend

Robert Peston | 17:01 UK time, Thursday, 17 June 2010

Late last night, our time, I asked Carl-Henric Svanberg whether events in the credit markets, and in particular the astonishing increase in the premium for insuring BP's debt, had contributed to the board's decision to suspend dividends until at least the end of the year.

OilThose of you who work in financial markets will presumably be unsurprised that he said that it was an important factor in the board's humiliating decision, because what happened to BP's debt insurance premium - or, more properly, to its credit default swap (CDS) premium - was quite remarkable.

Anyone wanting to insure loans to BP of six months or a year had to pay well over 1,000 basis points or 10 percentage points.

What does that mean? Well, a lender wishing to protect itself against any losses on a $10m loan to BP had to pay $1m for that protection.

Here's one way of looking at this.

If you believe that in the event of BP collapsing into administration, the losses on loans to BP would - for argument's sake - be 20 cents in the dollar, then a 10% CDS spread implies that the market's assessment of the probability of BP going bust is 50%.

Which is quite shocking.

Naturally, when BP's creditors take such a dim view of a company's financial prospects, it has to conserve as much cash as possible. Which means there's no way it can pay a dividend that consumes more than $10bn of cash every year.

That said, sometimes these CDS prices are utterly misleading, because the market in them is thin. But there is a substantial market in BP credit default swaps.

And the reason I'm boring on about all this is that a number of senior BP people - including members of the board - have volunteered to me that what worried them most was what was happening to the CDS price.

Here's some context: in March, before the Deepwater Horizon disaster, the CDS spreads on six-month and year loans to BP were 22 and 23.9 basis points respectively.

So insuring $10m of debt back then cost just over $20,000 - which is a bit less than the debt insurance premium on a rock-solid company like Tesco.

To put it another way, the Gulf of Mexico debacle has increased the cost of insuring BP's shorter-term debt by a factor of 50.

There are other ways of seeing the damage wreaked by the rise in the CDS price.

It means that if BP wanted to borrow for six months or a year, the rate of interest it would have to pay would rise to almost prohibitive levels.

Also those who do business with BP on credit could be deterred by the cost of insuring that credit.

To put it another way, the sharp jump in the CDS spread could have become a self-fulfilling event: if BP were unable to trade on credit, it would be bust.

So what's happened since the dividend has been culled?

Well, the one-year CDS spread has fallen several hundred basis points to somewhere over 500.

Phew.

But even a debt-insurance premium of more than 500 points remains grotesquely high for a company that's supposed to be one of the world's safest.

BP remains many many miles from normal.

Comments

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  • Comment number 1.

    Robert:

    BP suspended the dividend for the shareholders for the remaining of 2010...Probably for the simple answer is that: They (BP) had realise the reality of critical comments from U.S. Authorities (House of Representatives and other parties)......

    (d)

  • Comment number 2.

    Purveyors of business continuity and disaster recovery services will be dining off this one for decades.

    What is the market insurance rate for Tony Haywood's job? One in the eye for Green Wash too!

  • Comment number 3.

    What Obama is doing is blackmail. In effect he is saying to BP that if they every want to do business in the US ever again they have to appear to meet his demands. His demands are to make him appear tough so he will get more votes in the coming elections. His demands go far beyond BP's legal liability and completely overlook any aspect as to who might have contributed to the failings (e.g. US regulators, rig operators, etc.).

    And in the longer term it will backfire on the US as, the oil companies will now see what happens should there be an accident and, being businesses they will have to cost those risks into their price of oil. So BP at $20bn and rising, they will be seeing that it could happen to them as well so they need to build those costs into their equations and their income must rise to allow for it so cost of oil increases as well.

    But Obama will be through his elections by then and probably like Bush, something in history so it will only be the British (via pensions) and US (via oil price) people that will suffer. Again our politicians are letting us all down.

    and where is Cameron ? GTrue he had a chat with Obama - little good that did. BP has no choice but to go along with Obama's demands - that or never work in the US again. And they even end-up paying for Obama's politican decisions (i.e. the $100m to pay for oil workers out of work because Obama decided to halt drilling !! - no legal justification whatsoever).

  • Comment number 4.

    Hardly surprising - until BP stops the oil gushing out of the well the contingent liability is unquantifiable quite apart from claims and clean-up costs.

    It is a pity that the President needed this environmental catastrophe to lecture his fellow citizens on energy conservation and climate change. Will they take any notice?

  • Comment number 5.

    I could be wrong about this, but I thought that as a western corporate, the recovery rate assumption for BP CDS would be 40% - implying losses on loans of 60% (which is what the CDS protection seller would have to stump up) in the event of default.

    In that case, $1m for a year's protection, with a $6m payout on a credit event suggests a default probability of about 17% - still high enough to raise a few eyebrows, but not 50%.

  • Comment number 6.

    Maybe Cameron should take a leaf out of Mrs Merkel's book...and ban naked short CDS punts on key UK companies...such as BP.

    ...but then....DC is an arch Libertarian Neocon...which means, he does what he's told!

  • Comment number 7.

    BP and Bust?

    If BP goes bust so will others in the oil production industry as there are so many shared developments. Going bust also requires that there are no purchasers fro BP's assets - which is highly unlikely. So my guess (without the advantage of inside knowledge!) is that the company should actually retain substantial value even if it became terminally illiquid (which is also unlikely). So I would tend to go along with Tim C's (#5) view.

    Betting against BP is still in effect betting against big oil and that would require that there was a global switch from oil at an unprecedented and frankly unbelievable speed. However betting in the short term on the swings of sentiment via the options market must be making the banks and hedge funds huge sums of money (from each other mainly!)

  • Comment number 8.

    What I understand from my U.S. colleagues and friends is that this is all a lot of political rhetoric by the Obama administration.

    Yes....Obama is angry that he has been brought under pressure from his own supporters by B.P.

    Yes....the american public are angry about the damage done to their coastline and their communities.

    Yes....B.P. has to pay for this mess.


    But....there is a sense of this committee playing to the cameras and the crowds.

  • Comment number 9.

    This is what happens when lawyers, money men and politicians think they can run an engineering business.
    The lawyers convince the money men that only their clients know how and expertise can supply blow out preventers. Patented no less. Gotta work.
    The money men then get to work cutting corners to bring the well in at a profit.
    Oops all goes wrong.
    Politicians meanwhile try to look big.
    Blame some poor sucker left holding the baby.
    And just to prove it can and will happen on this side of the pond Sheffield Forgemasters get their credit line cut. After all there is no need to do anything properly anymore. We will buy in cheap and cheerful heavy engineering stuff. We after all work in nice clean offices.
    I bet Sheffield Forgemasters could make blow out preventers that work.
    What price a patent now?
    It'll be just the same with nuke stuff in a few years time.
    All so that lawyers, money men and politicians can make a living.

  • Comment number 10.

    The americans are at it again destroying the competition by fair means or fowl I wonder how many friday cars were made in the US but poor old Toyota were hammered and their competitivness compromised next up BP no one doubts the seriousness of the spillage but 20 billion dollars injected into the US economy is not chicken feed the US rightly boasts it is the most advanced and resilient country in the world BP are accused of rejecting overcautiousness this does not mean that the philosphy of caution was dumped I wonder how many wells are operated by BP and is the CEO required personally to supervise them that seems the message from the commitee

  • Comment number 11.

    Seems to me that most companies doing such leading edge oil extraction have been taught two things:

    1) Be very careful and don't take risks not endorsed by the governing body.

    2) Make sure that the entity drilling for oil is way way removed from the owner of the well. I would guess that the next company to drill in the same waters will be the American Louisiana Oil Drilling Company founded as a joint American / Cayman / Jamaican / any where way off shore, with an apparently large business in the USA that can be chopped away and liquidated at the first sign of retrospective action by the government.

  • Comment number 12.

    4. At 6:52pm on 17 Jun 2010, ARHReading wrote:

    "It is a pity that the President needed this environmental catastrophe to lecture his fellow citizens on energy conservation and climate change. Will they take any notice?"

    Yes agreed.

    Also it is a pity that BP needed this environmental catastrophe to learn about cutting corners on safety measures. Will the BP engineers take notice next time their contractors raise concerns? Or maybe they should start doing thing in-house, and really screw things up.

  • Comment number 13.

    Why do the congressmen keep asking the same questions over again?

  • Comment number 14.

    13. At 8:27pm on 17 Jun 2010, StartAgain wrote:

    "Why do the congressmen keep asking the same questions over again? "

    b/c they have nothing meaningful to ask or Hayward is dodging questions.

  • Comment number 15.

    Dave should have insisted the dividend be paid on time and in full.
    This is a political decision and when it comes to plucking a figure out of the air for the total cost of the spill it will go something like this ?

    BO: Dave, What's 2 and 2 ?
    DC: Whatever you want it to be Mr President.
    BO: Good boy Dave. I think we've got something really special going here. Fancy a trip to the Whitehouse ?

  • Comment number 16.

    #13 StartAgain
    "Why do the congressmen keep asking the same questions over again?"

    Their media focus group has indicated that they get a few more potential votes when they do so.

    Also the congressmen have learnt those lines so they keep spouting them parrot fashion. Feel sorry for them. They have no idea what they are saying.

    Think about it. If they knew what they were saying they would say it once.

  • Comment number 17.

    14

    In which case it's a pointless exercise and makes ALL involved look ridiculous

  • Comment number 18.

    Woman from Florida had little of value to add - but did add the comment regarding moving toward a clean energy future. Now America there is a thought - if something good is going to come from this make the change....the world is watching.

  • Comment number 19.

    I didn't know congress had so many deep water oil engineers, oh they don't, perhaps we could ask the President, about decisions made by the US military to bomb or otherwise kill or torture civilians in... well just about anywhere there are American forces, oh he's not sure of the details oh! come on Mr President you are the commander in chief.
    But Mr President you can get the guilty airmen that negligently flew into and cut down a cable car and killed many people back to the good old USA(the safe place with the one way extradition treaties) quicker than you can gas 5000 Indians to death.

    Those running the drilling operation should be questioned carefully, which shouldn't be difficult as most of them are Americans and live in the USA.

    Even though I know BP Amoco is responsible the President and congress are beginning to look very poor, just look how long things like the 9/11 inquiry took to come to the conclusion that planes crashed into the buildings and made them fall down.
    Just a few weeks after this accident happened a mile down into the ocean, the hectoring congress people are busy apportioning blame, I'm not even sure it will play well to their own voters, but hey I guess they know their own voters.

    Well I for one hope the price of oil rises in time for the next election.

  • Comment number 20.

    This kangaroo court is similar to the farce they organised around the financial crisis hearings.
    There are three investigations currently ongoing into the disaster, including a Presidential inquiry.
    The courts will be handling legal claims against BP and also possibly by BP with third parties.
    So why on earth do these idiots in Congress think they are achieving anything apart from media promotion of playing hardball with the evil CEO of the oil company?
    The irony is that as lawyers, these committee members know perfectly well that Hayward cannot possibly answer some of their questions without compromising BP's legal position.
    The Pipa Alpha inquiry (Cullen Report) which killed 167 people in the North Sea took two years from 1988-1990 to complete. These jokers think all the questions can be answered within 60 days!
    No wonder the US is in such a mess!

  • Comment number 21.

    It is, I think, because of local TV and radio in the US. Each politician wants to be sure that he/she is available as a sound-bite for local broadcast to their electorate.

  • Comment number 22.

    "what worried them most was what was happening to the CDS price"

    they were right to worry about this, coupled with the related downgrade of their credit rating to BBB, only just Investment grade

    it was trying to get by on the edge of Investment grade that finished Enron. For BP - with a much stronger asset base than Enron, but like the latter unusually dependent upon trading - to be in this position is grim indeed - see http://cityunslicker.blogspot.com/2010/06/bp-again-edging-into-enron-territory.html

  • Comment number 23.

    You know what I find interesting is the fact, BP rightly have to pay compensation for their failings and have set up a $20 billion fund to do so. Why interesting? Well BP have severely polluted the Bay of Mexico and are paying for it.

    The Sub Prime debacle severely polluted the world with less than honest financial products. Where's the compensation fund for that less than honest system where the losses are in the trillions of dollars and we will all have to pay to clean up the mess for decades?

  • Comment number 24.

    #19. Agree with your views.
    I have been on a few US based sites today (including one stock trader room). The general mood seems to be one of disgust at their own Congress holding this kind of witchhunt.
    Unfortunately, Congress believes one of its roles is to play out theatre on the media to try and convince their voters that they are dealing with this evil British oil company in a tough manner.
    Many of the questions could never be answered by a CEO until a proper investigation is completed. Other comments are playing to the gallery about what is being done on the rescue operations. Most of these congress men and women could not organise a 'drinking party in a brewery', yet they wax lyrical about how to manage this problem.
    This whole event is a farce.

  • Comment number 25.

    I'm English so will be branded biased but all I heard in the Congress hearing was a bunch of politicians listening to their own voices. Until an investigation is concluded; at it simplest this was a waste of time and at worst it was unsubstantiated gossip.

    It is dreadful the spill occurred and it much be a nightmare for many many people in America but BP is paying, is not arguing, is working on fixing it what more do Congress want?

    I think Tony Hayward did a great job today.

  • Comment number 26.

    The trouble with grandstanding is that you tend to take your eye off of the long term potential outcomes. The reality of energy politics is that the world needs oil and as much of it as it can get for the foreseeable future. Harm and demonise BP too much and its ability to trade successfully in the USA will be damaged permanently.In such a circumstance it becomes ripe for takeover. I am sure the Chinese would love to acquire such an excellent organisation as they seek to dominate world oil supplies and the leading edge extraction technologies and distribution networks that such a acquisition would bring. This is not the kind of process that the President and Congress should be indulging themselves in.It may make them feel good now but real Statesmen know the value of holding their tongue until it is wise to speak up. Oil is the lifeblood of our civilisation - without it the dark ages loom.The sad fact is that this just diminishes the President in the eyes of those who had a higher opinion and greater expectations of him as a global leader.Where and who should we turn our eyes to now?

  • Comment number 27.

    I am feed up with all of them.

  • Comment number 28.

    "It is dreadful the spill occurred and it much be a nightmare for many many people in America but BP is paying, is not arguing, is working on fixing it what more do Congress want? "

    They don't want a solution, and they don't want a logical approach to sorting out the problems. They just want someone whose ass they can kick.

    Sadly, the Americans are just another bunch of sheep who bleat whatever tune their media and government dictate.

    Pathetic.

  • Comment number 29.

    It seems to me that all the investment money is being corralled into an ever smaller pool of AAA rated investments.

    Pension fund managers must be tearing their hair out looking for safe havens when big government bonds (Spain) and blue chip companies (BP) start to look shaky.

    If I were a conspiracy theorist I would suggest that the wagons are being forced into a circle

  • Comment number 30.

    "The Sub Prime debacle severely polluted the world with less than honest financial products. Where's the compensation fund for that less than honest system where the losses are in the trillions of dollars and we will all have to pay to clean up the mess for decades?"

    And so say all of us!

  • Comment number 31.

    Morning Robert,
    a more important question to ask is why did BP agree to a $20Billion Escrow account over and above any clean up costs?
    The dividend is small change (relatively) and it would have been paid so that shareholders would have confidence that further dividends would be paid from revenue increases.
    The BP Chairman has agreed to suspend (or cancel?) the next three dividend payments and my question would be why would any of the large pension funds, countries like China and Norway, and large institutional investors in the USA continue to hold shares that give no income stream.
    Perhaps they are hoping for a windfall from any proposed take over offer?

    As I watch this Saga unfold each day, I am flabberghasted at BP's responses and attempts at PR.
    A US Senator is pushing for BP to be taken into receivership until final costs are established (maybe 20 years). Will BP agree to that since they have agreed to every other US demand?
    It was interesting today to see one US politician put forward the case to absolve the company which capped the well (Halliburton) from any responsibility for what happened (we were overruled by BP on our recommendation for the number of centralisers).
    Apparently the Deepwater Horizon rig wasn't regulated, and neither was the firm that capped the well. Shouldn't the US Government be addressing this potential safety shortfall?

    So no American sub-contractor was responsible for what happened, only the Main Contractor-amazing.
    As a final comment, there are hundreds of other rigs extracting oil in the Gulf, are their safety measures adequate? Are you sure?

  • Comment number 32.

    But even a debt-insurance premium of more than 500 points remains grotesquely high for a company that's supposed to be one of the world's safest.

    Anyone who knows anything about biology should know to question the long-term viability of the oil industry. Biologists understand ecology.

    How many other safe industries will no longer be judged to be as safe once a more accurate way of assessing cost is used? After all, isn't this what is happening here - BP have to take account of the environmental cost of their business rather than externalising these to the community?

    This is just a glimpse through the looking-glass. The American politicians will ensure BP, just like their other friends are taken care of for a few more years yet. I'm sure I heard a US politician describe these businesses as constituents...

  • Comment number 33.

    If BP cut corners I wonder how much of it was done by engineers receiving instructions from non-engineers? Too many of our large companies are run by people who do not have a technical understanding of their business.

    I am sure, if you were a senior manager in BP, you could find a tame engineer (hoping for advancement) who would say that something was sufficiently safe even if the the consensus was to the contrary.

    For those morallising about the oil industry, they have to remember why BP is so profitable. New technologies are many years off being mass market phenomena. Get the increasing control of the oil industry wrongly timed and you could get a bigger depression than even a few greedy bankers managed to achieve.

  • Comment number 34.

    BP poster-supporters are simply too enamoured with their corporate-love object. In their romantic stupor; their comments are mostly hilarious. Here is the first: “in the longer term it will backfire on the US”. Every country in the world has been jailing criminals, some even executing them, and how about the ubiquitous fines for misdemeanours like parking offences. But there is never the eradication of crime or misdemeanour perpetration. So if BP goes, there goes our source of oil? In my real world scenario, I can always find a ready and willing vendor to do the dirty business of extracting oil. Do have more faith in the theory of supply and demand to provide the necessary, whether at higher or lower prices. And much less faith in finding the ‘perfect girl of your wildest dreams’.
    Next, “I wonder how many wells are operated by BP and is the CEO required personally to supervise them that seems the message from the committee”. Good grief! Everyone one knows bedroom indiscretions are hard to control. But let us not extend it to deep-water indiscretions BP-style. Any decent oil company CEO should lay down the rules for drilling all ‘oil holes’, for both safety and profit sake.
    When “these committee members know perfectly well that Hayward cannot possibly answer some of their questions without compromising BP's legal position”, does it mean that we all should remain in the dark as to BP’s compromising positions? Or more succinctly, is Straightalk well-versed in this?
    “Congress believes one of its roles is to play out theatre on the media” and so does every other Tom, Dick and Harry in a publicity campaign. Except, BP, who being big oil corporate, must be above the glare of the limelight unless it’s in a positive light.
    “…BP is paying, is not arguing, is working on fixing it what more do Congress want?” Is this one of those liaisons where after paying, one finds it wanting? Or is it the weird type where one pays to want less attention? Or weirder still, after one pays, the other wants more?
    “I am sure the Chinese would love to acquire such an excellent organisation as they seek to dominate world oil supplies…” I am not to sure whether globalrep is for or against ‘mixed race marriages’. If ‘for’, I say ‘que sera sera’… whatever will be, will be. If ‘against’, it’s none of my business as its globalrep’s personal love matter.
    And have a nice day.

  • Comment number 35.

    #34. At 07:28am on 18 Jun 2010, sayasay wrote:
    "BP poster-supporters are simply too enamoured with their corporate-love object."
    ------
    On your first point, Sayasay, let's get one thing clear, since you seem to think you can determine people's political allegiance purely by a few comments on this post, having singled out one of my comments later in your post.
    I do not consider and never have considered myself a supporter of BP or any other oil company or for that matter the nuclear power industry. I have in fact taken steps and succeeded to significantly cut down on my carbon footprint over the past decade. However, whilst I should welcome the coming of an age where the world's energy requirements were satisfied by zero or low carbon emission systems, I have enough experience in life to recognise that given the lack of political will as witnessed at Copenhagen we are a long way from achieving such a situation.
    In the interim we are left with carbon based energy as the dominant source, of which oil provides the lion's share in many industry sectors globally, particularly transport. Hence, as desirable as it may be, the oil industry is not about to disappear overnight. Until it does, most economies need to seek ways to reduce consumption of oil and improve the capture of carbon emissions, but the fact remains we still need to mine for oil. Increasingly, that is becoming a harder and more expensive task which necessitates exploring and producing in deep sea locations, which of course is a hazardous affair. It did not need the Deepwater Horizon disaster to prove that point, although it has perhaps served to make the general public a little more aware of what is involved in producing oil in such locations.
    Personally, I should rather see a total ban put upon such exploration for environmental reasons, since I don't think the risk is worth it. However, I do not believe that is going to happen anytime soon; in my opinion, my guess is that the Obama moratorium for deep sea drilling in the Gulf will be lifted within 12 months at most. If you think those are the views of somebody who has BP as their "corporate love object" then you are entitled to your opinion, but you are wrong in this case.
    On a second point, you specifically picked up on my comment:
    “. . . these committee members know perfectly well that Hayward cannot possibly answer some of their questions without compromising BP's legal position”, to which you commented: "does it mean that we all should remain in the dark as to BP’s compromising positions? Or more succinctly, is Straightalk well-versed in this?"
    Let's just say that I have some experience and formal training in commercial law and so whilst I should not claim to be an expert, I am confident to stand by my original statement. I do not want us to remain in the dark about the role BP played in this disaster, but I think you would find most lawyers and indeed engineers involved into investigation of major accidents in any industry would say that the conclusions as to who was responsible for what happened have to be determined through the more professional channels of investigation, which are currently ongoing.
    Frankly, as stated in an earlier post, I think the Congressional sub-committe is a waste of time and money. The Cullen Inquiry into the Pipa Alpha disaster in the North Sea of 1988 (which killed 167 people) took two years to present its findings. Parliament then took steps to introduce legislation that were to impact all operators in the North Sea. This was not an inquiry that was conducted under the glare of television cameras and the world's media, any more than the more important three investigations going on in the USA outside of Congress. That I believe is the proper and fair way in which to find out what caused this accident, who was responsible, what steps should be taken to reduce the risks in future and whether criminal proceedings should follow against any individuals or corporations; as well as making sure that full compensation is paid to those legally entitled to it.
    I rest my case.

  • Comment number 36.

    29. At 00:49am on 18 Jun 2010, BobRocket wrote:
    It seems to me that all the investment money is being corralled into an ever smaller pool of AAA rated investments.

    Pension fund managers must be tearing their hair out looking for safe havens when big government bonds (Spain) and blue chip companies (BP) start to look shaky.

    If I were a conspiracy theorist I would suggest that the wagons are being forced into a circle

    ======================================================

    Hmm, Credit Crunch Part II is looming I think. Except that the sequel may well surpass the original. As I understand it the CDS market imbalance was not addressed first time around and the collateral damage in the financial sector will be severe.

    As an aside how on earth is Santander a Spanish bank in a good enough position to acquire 300 RBS branches in England? It also does not make much sense as the new branches will sit beside their existing Abbey National etc branches. If they think that existing English RBS customers are staying with RBS they think wrong. I was with RBS for 30 years but their service standards have deteriorated severely and rip off mentality increased since the bail out and I have moved on.

  • Comment number 37.

    As an oilfield professional, I have to say I was disappointed by the quality of the congressional hearing yesterday. In my view, it was conducted by ill informed and unqualified politicians who had smelled blood and wanted their share of the kill. It seemed to be nothing more than a kangaroo court, somehow I expected better.

    It is right that BP should conduct their internal investigations, but that should not be the end either. What is needed is a full technical investigation into the causes of this disaster, conducted by a competent and independent authority.

    This is what happened in the UK after the Piper Alpha incident with Lord Cullen's enquiry. The same thing now needs to happen in the USA with regard to deep water (and indeed all) drilling activities.

    Also, while BP and the other companies involved are primarily to blame for this massive blowout, it is also important to look at the role legislators and regulators might play in preventing future incidents.

    I have to say that in general, from my experience, drilling in the USA sometimes appears to have been unrestricted. For instance, it is not unknown for a land rig to drill without any BOP (Blow Out Preventer). This would never be allowed in Europe or most other locations around the globe.

  • Comment number 38.

    America was hoping for a deep sea oil stream to help it out of its financial black hole.
    Watching the "daily show" last night showed American Presidents going back to Nixon promising the American people independence from oil imports by developing new energy sources and energy conservation.
    http://www.youtube.com/watch?v=Ptg-5Puk6So
    None delivered they like many just keep chasing oil in riskier and riskier places for exploration.

  • Comment number 39.

    So we're back on BP are we?

    Well I saw an interesting conflict of interests in an interview on Channel 4 with who I think was the governor of mississippi.

    He's a Republican, and therefore is required to back the oil industry - however he's obviously getting flak from his electorate about the mess all over the shore.

    What was most revealing is when he was asked if BP should be 'moved aside' by the US Government - he replied indicating that BP have to be involved in the clean up because they are the only company in the world with the resources and expertise to clean up this spill and fix this leak

    So let's recap - we have a new drilling technique where there is only one company in the world who can fix any issues that may arise - and there are several different companies operating these deepwater rigs.

    Doesn't sound like good risk management to me - I mean what hwould happen if we had 2 or 3 deepwater spills on the go - would BP have to clean them all up? They're struggling with one - let alone more.

    The people of the world are being sold a lemon - they're assured all necessary steps are taken to assure safety - but who actually bothers to check?

    They will destroy our world chasing their diminishing profits - mark my words - we are going to see more and more industiral accidents as 'cost cuttting measures' are imposed. Every company in the world will be making financial decisions and even human life has a 'financial cost' to them.

    Where do free market economics lie now - on this BP issue? I mean it's being efficient (financially) - as the financial cost of the oil spill is far outweighed by the company's ability to raise money - what Capitalism has done is 'put a price on the world'.
    Free market economics will allow BP to gush oil into the sea for as long as it can afford to do so.....looking at the size of BP - this is a pretty long time.

    With regard to the cds spreads - well I wouldn't pay too much attention to it yet - we're in a market which is filled with jittery investors - the spread has been jumping up and down on a daily basis depending on the 'news from the spill'.
    If anyone thinks this is rational behaviour by any stretch of the imagination - then they need to go and visit their Doctor. Once again the irrational investor who haunts market ideology is back - or rather just being noticed again because he / she never actually left us.

  • Comment number 40.

    35. At 08:41am on 18 Jun 2010, Straightalk wrote:

    "However, whilst I should welcome the coming of an age where the world's energy requirements were satisfied by zero or low carbon emission systems, I have enough experience in life to recognise that given the lack of political will as witnessed at Copenhagen we are a long way from achieving such a situation."

    I noticed you said 'political will' and not 'technological restrictions' - which is where we're at.

    We have the technology - we have the resources - we just don't have the Governance to take us to Utopia.

    For that we will have to take control ourselves - and that means everyone coming out from under their rock where they assume "someone else will fix it" and change their habits of a lifetime and start living in the real world.

    If we do not - our destruction is assured. Mother nature will not allow the destruction of her planet for our insatiable greed.

  • Comment number 41.

    36. At 09:26am on 18 Jun 2010, excellentcatblogger wrote:

    "As an aside how on earth is Santander a Spanish bank in a good enough position to acquire 300 RBS branches in England?"

    Now that is a fantasy all of it's own...along with the Economics of Spain in general...

  • Comment number 42.

    37. At 09:49am on 18 Jun 2010, George_Ward wrote:

    "As an oilfield professional, I have to say I was disappointed by the quality of the congressional hearing yesterday. In my view, it was conducted by ill informed and unqualified politicians who had smelled blood and wanted their share of the kill. It seemed to be nothing more than a kangaroo court, somehow I expected better."

    That's funny - that's what the bankers said when they were hauled up in front of the same hearing. Must be that 'big people' don't like to be held up for their failures. Sure it was partizan, but did you expect anything else from a set of politicians trying to woo their electorate?

    "It is right that BP should conduct their internal investigations, but that should not be the end either. What is needed is a full technical investigation into the causes of this disaster, conducted by a competent and independent authority."

    What would have been better is a full technical investigaton before they started deepwater drilling to establish what they would do if it went wrong.

    "Also, while BP and the other companies involved are primarily to blame for this massive blowout, it is also important to look at the role legislators and regulators might play in preventing future incidents."

    Ah the old "I am not able to act responsibly so you taxpayers will have to set something up to draw up guidelines for us to then circumvent at a later date"....didn't I hear that somewhere else recently from another industry?

  • Comment number 43.

    Everyone needs to read this. It pretty much sums up what is happening to us today.

    http://www.zerohedge.com/article/guest-post-what-do-bp-and-banks-have-common-era-corporate-anarchy

  • Comment number 44.

    "36. At 09:26am on 18 Jun 2010, excellentcatblogger wrote:

    As an aside how on earth is Santander a Spanish bank in a good enough position to acquire 300 RBS branches in England?"

    The same way the rest of the Spanish businesses (among others) have been buying assets left, right and centre....massive borrowing.

  • Comment number 45.

    #40. At 10:37am on 18 Jun 2010, writingsonthewall wrote:
    "I noticed you said 'political will' and not 'technological restrictions' - which is where we're at.
    We have the technology - we have the resources - we just don't have the Governance to take us to Utopia."
    I agree with you. The disconnect between what could be done and what will be done is amazing.
    Of course, Thomas More's original work on the subject suggests his choice of the word 'utopia' was not only a place that does not exist, but a place that cannot exist.
    Looking at human history and social psychology, I tend to agree with this interpretation.

  • Comment number 46.

    I think the problem shows up a huge culture clash between European senior management and that in the USA.

    The CEO and Chairman of BP come across very poorly in the US. The CEO's body language and demeanour look detached and aloof whilst Americans' in my experience like a 'chief' who is engaged, enthused and even hyper-active. That's before both of them made statements which in once case seemed to belittle the problem and in the other referred to 'small people'. The one thing the US does not do is 'small' - surely we've learnt that?

    I don't suppose the US Congressmen were upset personally but it has given them the perfect mandate to humiliate and hunt down BP. It looks like BP is now an open cash box for the authorities in the US.

    I am disturbed to hear that US stockholders can effectively sue BP for the loss in their stock's value - is this true? That looks like an open ended commitment for BP.



  • Comment number 47.

    re #36 & 44
    It could be that, of the Spanish banks, they are the best run and have been very careful with their investment strategy. They may also have been benefitting from investors seeking a safe haven for their cash.

    When NR, B&B, RBS and HBOS were having their 'moments', it was likely that other banks would benefit. The UK Governments setting of a £50,000 limit for deposit protection was always likely to encourage the movement of cash around the system.

  • Comment number 48.

    43. At 10:53am on 18 Jun 2010, OffToOZ wrote:
    Everyone needs to read this. It pretty much sums up what is happening to us today.

    http://www.zerohedge.com/article/guest-post-what-do-bp-and-banks-have-common-era-corporate-anarchy
    --------------------------------------------
    Unsubstantiated, pre-investigation generalisations can sum up pretty much anything!

  • Comment number 49.

    Its all very well for Congress to give BP a public lashing, but why has there been no mention of the other players who are also implicated in creating this catastrophe?

    Halliburton for one will have some explaining to do if the cementing of the well head was actually the cause of the initial explosion.

    The US Minerals Management Service suggest this is the biggest single cause of well blowouts in the Gulf of Mexico, accounting for 18 of 39 blowouts in the region in the last 14-years.

    Indeed, the Mineral Management Service itself has been found wanting in its pursuit of its own regulatory prudence, having failed to follow up on a 2004 study on the ineffectiveness of sheer rams in deep water exploration, which are supposed to seal off well leaks.

    Details can be read here: http://bit.ly/aZR2xy

    BP may well be taking a well deserved kicking in the US, but people in glass houses...

  • Comment number 50.

    The US administration appears to have admitted that the regulatory system failed. Can BP shareholders sue? They invest on the basis that administrations in whose territory the company operates are fulfilling their duties.

  • Comment number 51.

    42. At 10:52am on 18 Jun 2010, writingsonthewall wrote:
    37. At 09:49am on 18 Jun 2010, George_Ward wrote:

    "As an oilfield professional, I have to say I was disappointed by the quality of the congressional hearing yesterday. In my view, it was conducted by ill informed and unqualified politicians who had smelled blood and wanted their share of the kill. It seemed to be nothing more than a kangaroo court, somehow I expected better."

    -------------------------------------------------
    I would tend to give the opinion of George Ward some weight, especially when added to some of the above posts. Add into the mix what I heard of the Hearings and know about the US way of doing things, and I wonder why, WritingOTW, you have such a problem with that paragraph?

    I don't actually recall the bankers saying that sort of thing in front of the Parliamentary Sub-Committee, or outside, despite the fact that some of the Committee were ill-equipped to consider the matter and/or were carrying a certain amount of bias when questioning witnesses.

  • Comment number 52.

    Robert - as you're the business editor - could you do a little piece about the arrest of 18 dutch women for 'guerilla advertising' please?

    I've heard some rubbish in my time, but this takes corporatism to a whole new level. Using the law to protect the sponsors of events is outrageous, and I understand this law applies in Germany and other european states - not just South Africa (although I'm not sure of the situation here).

    Is this how it will be in future? - Will I not be allowed into the Olympics with the ticket I bought and paid for because my hat does not bear the logo of the official sponsor?

    The unstoppable march of Fascism continues - and our democrats throw everything on the fire in a sacrifice to our new lord.

  • Comment number 53.

    #44: "....massive borrowing". I believe that were are also tax breaks for Spanish companies that helped deals such as this (the big deals at least).

    #45: "We have the technology - we have the resources - we just don't have the Governance..". It seems the Spanish Government (a shining example of such "governance") has decided that it can no longer afford to subsidise the technology and resources. Who will take the lead now?

  • Comment number 54.

    How many times does BP have to keep apologising and say that they are going to pay for this? They really need to stop being bullied like this. They are just being blackmailed.
    I am so disappointed that Cameron's government are sitting back and doing nothing. It would not be like this the other way round. An American company would not give billions in compensation without any legal fight.
    Americans are so negligent about the pollution they cause around the world but are so caring for their environment all of a sudden. They just want the profits from BP, and will be happy to take the money for years to come.

  • Comment number 55.

    45. At 11:11am on 18 Jun 2010, Straightalk wrote:

    "Of course, Thomas More's original work on the subject suggests his choice of the word 'utopia' was not only a place that does not exist, but a place that cannot exist.
    Looking at human history and social psychology, I tend to agree with this interpretation. "

    History is not always indicative of the past and social psychology can easily be changed - in fact it's constantly changing.

    Utopia can and will be achieved eventually - however there will be a lot of false dawns, bad periods and arguing before that happens - but happen it will. Even if the ultimate utopia for this planet is one which has no human existence (utopia may not be from the human perspective).

    I believe that every man has it within himself (or herself) to change - and that every baby born has the same morals (nobody's born evil) - therefore the social psychology is merely a reflection of our upbringing - it was the case when Plato said it and it's still the case now. In order to change that we must ditch the anarchic way in which we raise our young and then we have a chance of building a free and fair society.

    Human superiority is a myth - everyone is a record breaker in some discipline - it's just that only a few discover what that discipline is in their lives - the rest are poor performing square pegs in round holes.

  • Comment number 56.

    42. At 10:52am on 18 Jun 2010, writingsonthewall wrote:
    37. At 09:49am on 18 Jun 2010, George_Ward wrote:

    What would have been better is a full technical investigaton before they started deepwater drilling to establish what they would do if it went wrong.
    ----------------------------------------------------------
    BP and the sub-Contractors were doing something unique. They would have made their best plans, developed the techniques and equipment needed, tested the kit in different ways, used all their experience but it still went wrong, in part because accidents do happen. Accidents can actually happen without anyone doing anything really wrong.

    I'm sure that neither BP or their sub-Contractors wanted anything to go wrong, especially in such a litigous location as the USA.

    It really would be a good idea to wait until the full details are known about what happened down on the sea bed before getting all huffy. Shame the Senators and Congressmen didn't think a bit more before grandstanding in the way they did as it, and your posts, don't really help a whole lot.

  • Comment number 57.

    43. At 10:53am on 18 Jun 2010, OffToOZ

    Very good article - it shows exactly why the people need to rise up against the corporations.

    How many corporations have fallen foul of the law - but as a result cease to exist? - not many I'll wager.
    The law is all about protecting the wealthy from the poor - with a few human rights thrown in to make it look like the law is for the people.

    As Marx said - there are always a few cases 'lost' by the state - but this is merely to make the system look fair. The vast majority go against the people.

    As many people have mentioned the union carbide / Dow leak - a clear abuse of the law followed by the fear of prosecution by the authorities against a corporate giant.

    You could look at most industrial accidents over the last 30 years and the pattern is the same - I thought we were "never going to have another ladbrooke grove train crash" - but there have been multiple deaths on the rail since then. The train companies still operate despite the lives still being lost.

  • Comment number 58.

    48. At 11:52am on 18 Jun 2010, Up2snuff wrote:

    "Unsubstantiated, pre-investigation generalisations can sum up pretty much anything!"

    La la la la la - fingers in ears - la la la la la.

    Are you seriously trying to suggest that corporations don't use their power and position to avoid prosecution for crimes against humanity?

    Do you want me to list them for you - or do you still have your fingers in your ears?

    Maybe you need to ask why so many people are diabetic in the US and then ask yourself which country has the most 'free market' on food provision.

    Which country is the most unhealthy and which one has the least controls?

    In the UK you can 'kill your own employees' and all you need to establish is 'the price'.

    http://business.timesonline.co.uk/tol/business/law/article7021753.ece

    ...or is the times now "Unsubstantiated" too?

  • Comment number 59.

    52. At 12:07pm on 18 Jun 2010, writingsonthewall wrote:
    Robert - as you're the business editor - could you do a little piece about the arrest of 18 dutch women for 'guerilla advertising' please?

    ...Will I not be allowed into the Olympics with the ticket I bought and paid for because my hat does not bear the logo of the official sponsor?
    --------------------------------------------
    I believe that cafes and bars near the venues at the World Cup cannot open around match times because they are not the official suppliers of whatever they offer. So much for stimulating the host economy.

    There are already by-laws being passed in London to allow these restrictions during 2012. FIFA and the Olympic Commission are not alone telling cities what they may do around international events.

  • Comment number 60.

    and where is Cameron ? GTrue he had a chat with Obama - little good that did. BP has no choice but to go along with Obama's demands - that or never work in the US again. And they even end-up paying for Obama's politican decisions (i.e. the $100m to pay for oil workers out of work because Obama decided to halt drilling !! - no legal justification whatsoever).
    ***********************************
    Indeed, Senator Barton had it correct when he said BP had been subjected to a "$20 bn shakedown". Hope America is ready for higher oil and gas prices as a result of this. Clearly the oil industry cannot bankroll the entire economy of a country on grounds of spurious liability and grandstanding by an impotent president.

  • Comment number 61.

    #56 Up2snuff

    I love your optimism but this is the modern MBA thinking dominated BP we're talking about. It's highly unlikely they would have spent very much on developing the techniques and equipment needed and/or tested the kit as you suggest.

    Twenty five years ago and I would have agreed with you. Not now though.

  • Comment number 62.

    13. At 8:27pm on 17 Jun 2010, StartAgain wrote:
    Why do the congressmen keep asking the same questions over again?
    ***********************************
    ....Because the senators have no subject knowledge of what they are talking about. The questions are writtem out for them and sometimes their fat fingers obscure the text as they struggle with polysyllabic words. Ahhh...the leaders of the free world in action, so impressive...

  • Comment number 63.

    BP suspended the dividend - Wow - What a shock - Not.
    BP is saying to the world 'Hey. look, we really do care, honest'. Yeah, right.
    BP suspended the dividend because it knows the damage this will do to all those who argued for and demanded it. BP knows that when the pain of not paying its dividend begins to hit the public, then all thoughts of oily beaches will go out of the window and politicials will be blamed for all the financial hardships that a suspended BP dividend will bring. BP will then be forever more immune to such political interfernce. Job done. Win win. Its just business folks

  • Comment number 64.

    #57,WOTW: "never going to have another ladbrooke grove train crash". Interesting quote if it could be traced. Who said that?

  • Comment number 65.

    I bet the meeting has already finished. The meeting where Carl-Henric Svanberg and his mates sit around with the PR people deciding how to rescue the reputation of BP.

    I wonder how much money will be donated and to which specific charities as the oilmen try to show they are good guys after all.

  • Comment number 66.

    57. At 12:19pm on 18 Jun 2010, writingsonthewall wrote:
    43. At 10:53am on 18 Jun 2010, OffToOZ

    Think I'm on a roll today, another really good coffee break read:

    http://gospelofreason.com/2007/05/24/george-carlin-the-planet-is-fine/

    Not for you though Up2snuff.

  • Comment number 67.

    7. At 09:49am on 18 Jun 2010, George_Ward wrote:

    Also, while BP and the other companies involved are primarily to blame for this massive blowout, it is also important to look at the role legislators and regulators might play in preventing future incidents.


    The laws are there. Conveniently the Bush government via a man called Ashcroft signalled they would not be enforced rigorously becase law/regulation enforcement would be concentrating on US security after September 2001.

    I don't need a police officer breathing down my neck to ensure I don't steal. I just don't break the law. That is what most adults do, they do the decent thing, act responsibly towards others without constant supervision. I'd expect professionals to act similarly.

  • Comment number 68.

    58. At 12:27pm on 18 Jun 2010, writingsonthewall wrote:
    48. At 11:52am on 18 Jun 2010, Up2snuff wrote:

    "Unsubstantiated, pre-investigation generalisations can sum up pretty much anything!"

    La la la la la - fingers in ears - la la la la la.

    Are you seriously trying to suggest that corporations don't use their power and position to avoid prosecution for crimes against humanity?
    -----------------------------------------------------
    Nope. BP are not on trial. Yet. And if they were, we would want to see the evidence wouldn't we, WotW?

  • Comment number 69.

    re #58 Writingsonthewall

    ...or is the times now "Unsubstantiated" too?

    --------------------------------------------
    The link you provided, which I went to and read and then referred to, wasn't in the times (sic).

  • Comment number 70.

    re #58
    Buntsfield

  • Comment number 71.

    ...of course the US aren't the only post-war superpower that BP annoyed - remember that TKN-BNP fiasco?

    http://news.bbc.co.uk/1/hi/business/10349162.stm

    Smoke, fire - where there's....

  • Comment number 72.

    re #70 and #58
    Whhooops! Beg pardon: Buncefield

  • Comment number 73.

    This should have been declared an international incident and Britain should have been pitching in with the containment and the clean-up. Apparently we've helped out with large quantities of dispersant...

    Big oil have the biggest vested interest in getting this sorted quickly, headed by BP of course. Collectively they have been very quiet and BP keep underestimating everything (or going along with the low estimates of the independent US scientists). When Big Oil have commented it has been that their offers have been spurned. The failure to contain the spill is in-part because the scale of the operation has been short changed. Big Oil say this has been the call of US administrators.

    A retired Shell CEO commented on US TV that the boom technology and chemical attack being deployed is old news and ineffective for a spill of this size. The containment needs to be be at least an order of magnitude bigger, particularly since there is no guarantee that even the relief wells will stem the flow. The Saudis have successfully deployed massive tankers to suck up and filter polluted water in other situations apparently and large barges strung together can be used to protect river inlets and large areas of coastline much better than booms. These solutions are not deployed because they cannot be manned by US labour and their is some legislation that enforces this (Jones law from 1928 or some such).

    BP may be responsible for the spill but the failure of containment and clean-up seems to have US hands all over it.

  • Comment number 74.

    I watched much of the televised Congressional Committee proceedings and can honestly say that I was amazed at the asinine conduct of the Committee. They had obviously become the policemen, prosecutor, judge, jury and executioner all wrapped up in one unit - well ahead of any outcome of various investigations being finalised. Undoubtedly, this was a "kangaroo" court which demeaned the US Government and rule of law. They were "howling for blood" and used every insult and innuendo imaginable. If this was the best the US Congress could field, then they are in poor shape and do not serve the great American public. George Bush was no great leader, but he is preferable to the clowns on that Committee.

  • Comment number 75.

    The whole thing puts a new slant on the phrase 'Hayward Fault'. I refer to the one in California.

  • Comment number 76.

    I don't know why we are even discussing this. By it's own incompetence and poor PR BP has put itself in play. Not with other oil companies, but with Sovereign powers: the US, Russian and Chinese governments. BP's CEO said they dril several hundred wells a year (that was his defence!). Do you think those countries don't know that?

    Forget all the details of this and that claim. The halving of BP's market cap - with more to follow is an engineered solution, which given a tiny ray of light will be devoured by the big 3. Britains's biggest company needed to be led by Britain's biggest business leader. Clearly it wasn't. Technocrats will not do - you don't protect the Crown Jewels with the home guard.

  • Comment number 77.

    Just to say, BP has let the whole debate move to a higher plane (plain?). One of the world's top ten companies CANNOT play a dead bat. You guys are always a target because you control massive assets. The moment you show weakness and vacillation you are dead and vultured and those truly valuable assets will be on show for a pittance.

  • Comment number 78.

    To 21 up2snuff & 62 rupe in response to my post @13 whay do they keep asking the same questions.

    Thanks to you both - start to explain some of what was going on. I have to say I was captivated by the proceeding. It seemed almost surreal especially when they asked a question then when the didn't immediately get an answer or even if they did just speak over Hayward. I was particulalrly struck by Dingell - Mr "put that on the record" where do they get them from - he is like a caricature out of one of their sitcoms. And Waxman - again what an annoying man - is he any good or just full of hot air??

    Did Tony Hayward deserve to go through that? He is well paid and hasn't lost a relative in this accident or had oil wash up in his back garden - so clearly it could be a lot worse. He may be thick skinned and just laughed it off (the pantomime of the hearing not the incident itself)or perhaps he went back to his hotel and cried himself to sleep? We have all got our breaking point after all.

  • Comment number 79.

    76 Lost... I have thought about if someone else ws in charge of BP and wonder how Justin Rose or Terry Leahy may have handled the situation - as CEO's that is not oilmen.

  • Comment number 80.

    Further thought on yesterday - will the we would have done it differently line coming from Shell, Exxon & Conoco come back to haunt them. There but for the grace of God....

  • Comment number 81.

    #78

    Come on, this is the performance. It's intended to convince US public opinion, And guess what, not a single person there has been impressed by Tony's dead, flat, bat. The game is to convince US public opinion. Then, when you have you can, absolutely do what you like. I cannot believe BP's board cannot see this. If they don't, they must go. If they do but are impotent, they must go. You will NEVER win by abstaining.

    I am so tired of this, the outcome is certain.























  • Comment number 82.

    #79

    I think you know the answer. They would handle it as the CEO of a huge business. Not as the world's highest paid geologist. Sad for him, I am a scientiest too, but from the very first TV shots I knew he was out of his depth. A bit like his oil well.

  • Comment number 83.

    re #78
    The Americans have their governmental rituals, we have some of our own.

    It would have looked bad if Mr Hayward had not gone to face them. It may not have been possible to not appear although I would have thought any reasonable US Chairman would have allowed a postponement in view of the circumstances. I have a feeling an 'invitation to appear' is almost as good as having received a subpoena. Experts on the American Constitution will no doubt let us know if the hearings have a power of arrest.

    As to 'dumb' questions being asked, I guess there are expert oilmen in Congress and the Senate or Senators/Congressmen with oilmen friends but not everyone comes in that category. Add to the mix the desire to impress with the mid-term elections just around the corner then that may have led to the strange, to our eyes and ears, 'performance'.

    Have to say again, we are not immune from these two things in our Parliament also. I could take some pertinent digs at some of our MPs but will resist the temptation.

    What I don't understand is why a company of UK/US mix, of that size and importance, appears to be making such a mess of public relations and communications. While anger and bad temper might block the ears of US politicians to any messages being put out, I don't see signs of BP being proactive in the US media. Not much reference has been made to BP's PR effort on R4. Perhaps some US posters to this site can let us know what BP have been doing in the US media.

  • Comment number 84.

    @81 I am so tired of this, the outcome is certain.

    They should merge with Shell

  • Comment number 85.

    73. At 4:15pm on 18 Jun 2010, Alistair Thomas wrote:

    BP may be responsible for the spill but the failure of containment and clean-up seems to have US hands all over it.


    I disagree with you here. Why would BP expect someone else, namely the American authorities, to clear up the mess when they pull every trick they can to ensure they pay little or no taxes? They don't like the social contract.

  • Comment number 86.

    #84

    They wish. Not if the big 3 wish. I think we're way past a kindly Shell-BP family. Much bigger forces have been invited to & by the carcass.

  • Comment number 87.

    As an addition to #83

    Another factor in what is happening on the 'Hill' is the President and the likely Republican opposition for 2012 are not looking too strong at present.

    So now is possibly both the time and an opportunity for some of the experienced US politicians to see if they can get on the list for their party's nomination. That may lead some to keep their heads down and keep quiet in case they appear to back a loser and for others to do the huffing and puffing to raise their profile.

  • Comment number 88.

    Look on the bright side. As a consequence of the moratorium on drilling in deep water we're very likely to see a sharp increase in oil prices.

    It will also lead to an over supply of sub contractors in the drilling industry. There is already talk that Oil companies are going to use this as further pressure on sub contracting companies to cut prices (and their costs).

    Both likely to increase the profits of all Oil companies....BP can afford it. If they can't, tough. It was their responsibility to make sure this well was drilled safely...not Transocean or Halliburton or regulations.

    Any future findings on this disaster would have to challenge the culture of incessant pressure to cut costs....lowest bidder wins contracts. They pay lip service to safety but cutting costs is endemic to the drilling industry from top to bottom. This culture can only lead to short cuts and lack of experienced and well trained people.

  • Comment number 89.

    66. At 1:48pm on 18 Jun 2010, OffToOZ wrote:
    57. At 12:19pm on 18 Jun 2010, writingsonthewall wrote:
    43. At 10:53am on 18 Jun 2010, OffToOZ

    Think I'm on a roll today, another really good coffee break read:

    ------------------------------------------------
    Too right, mate. I had a look though, definitely not my cup of tea, old chap.

  • Comment number 90.

    61. At 1:23pm on 18 Jun 2010, Wee-Scamp wrote:
    #56 Up2snuff

    I love your optimism but this is the modern MBA thinking dominated BP we're talking about. It's highly unlikely they would have spent very much on developing the techniques and equipment needed and/or tested the kit as you suggest.

    Twenty five years ago and I would have agreed with you. Not now though.

    ---------------------------------------------------------------

    If you've worked in the industry, then thanks for the insight.

    My expertise, if I have any (with only two brain cells) is mostly in business/economics/finance. So looking it from that point of view I find it strange that posters here get exercised over the amounts of oil spilling in the sea (and BP's difficulties in estimating it) and that they then say 'BP did it (almost) deliberately'. I feel my ears going pointy as I 'say' "But that is not logical, Captain!".

    Setting the horrific environmental damage apart, that amount of oil would have made everyone in BP and the US Treasury and investors around the world a lot of money. Not only that, BP were not under really big supply pressure to get the oil out. As I understand it, there is more oil available around the world at the moment than customers and refining capacity.

    The only reason to rush and/or cut corners that I can think of is that perhaps BP wanted a good news story of lots of oil to come on stream in an area close to previous desasters including their own Texas accident. Good news would have helped to eradicate the bad memories of that and provided some affluence for post-'Katrina' renewal.

  • Comment number 91.

    @90

    Not sure about the time(scale) but with regard to the place America wants to get more oil from within their own borders - rather tahn from further afield - hence deeper drilling in the gulf - still got to be safe though.

    Sin in haste..........

  • Comment number 92.

    Does the US president have the ability to overide US law because so far no court has found bp guilty of anything. If the president or Congress committees can force an international company to withdraw a dividend that is already promised then all companies dealing in the US are at risk of being forced into liquidation by the US administration and the principles of law are then suspended. The action of the committee is worse than anything seen so far by the Russians but I am sure that they are watching this precedent closely.

  • Comment number 93.

    The Washington stuff is nothing more than grandstanding by a bunch of overcooked hams parading for the public.

    If you want to know what will REALLY happen then look at the Exxon Valdez case. 20 years of appeals before any payouts.
    http://seattletimes.nwsource.com/html/localnews/2008478462_exxon07.html

    The press is milking it for all it's worth though, there's not much else to get excited about at the moment, especially with the way Engerland are playing.

  • Comment number 94.

    Well, Peston did contrive to get something right in there, amongst the sundry noise and effluvia: "these CDS prices are utterly misleading".

    Sadly, he then apparently proceeded to be misled. ;-)

    To wit, his belief that the implication, subject to his further for-the-sake-of-argument-assumption, is that "the market's assessment of the probability of BP going bust is 50%" is just... plain... wrong.

    CDS prices are what CDS prices are, Bobby. Drawing your conclusion is congruent to concluding that if a share price doubles, the market has valued the PDV of its future dividend payouts to the date it ceases to be, plus the PDV of its disposal value, at twice its original amount. But, the market hasn't done any such thing. The price movement is merely an artefact of supply and demand economics. Period. Much the same here.

  • Comment number 95.

    If it is true that Tony Hayward is at the Cowes Yacht Races as I write, then BP not only should put him out of his misery but for Heavens sake get someone in the company to deal with their PR professionally. If this level of sheer bloody incompetence is tolerated by the BP Board, then forget dividends, just sell the company. Does Obama really think BP will ever be able to pay for the damage caused....we are talking about the equivalent of a small war in terms of collateral damage to the environment. This will require international levels of finance to clear up the mess, no single company would ever have the funds as will become apparent.

  • Comment number 96.

    #95

    "Sheer bloody incompetence"?

    BP has dealt with the leak and its consequences in an exemplary manner, and their CEO took personal charge of the operation.

    Do you really think there is any place for PR jobsworths in a highly technical operation? Come to that the ravings of idiots such as Obama and Emanuel, who prefer to personally attack Hayward rather than to provide assistance?

    You obviously feel that spin is more important than action; fortunately you are in the minority. Most of us get on with our lives, and indulge in such activities as oil exploration and production and cleaning up oil spills. Whilst we risk our lives and health, subhumans with the gift of the gab reap the benefits.

    Time for a change, methinks.

  • Comment number 97.

    Could be that the american oil industry does not like an international competitor in its midst and has superior lobbying capability (which judging from BPs PR would not surprise me).

    If BP is sufficiently emasculated by the demands of the US administration, they might want to get out of the the bay of mexice, or even the USA. Selling their US exploration business to an american company at a knock down price in exchange for capping their liabilities might be an attractive idea

  • Comment number 98.

    I wonder what BPs walkaway is on the whole thing? Clearly not 20 yards, but there must be a number that makes BP presence the the US market viable or not?

    If the US gov't bleeds BP dry or is anticipated to do so, wouldn't an organisation choose survival over a certain protracted death? So what would stop BP from writing a cheque for $75 mill (apparently its legislated liability), selling its US assets to the Chinese and continuing its business in Europe, Asia, Africa, South America, the Middle East & Australasia?

    Sure, you want the worlds thirstiest country as a customer but that's irrelevant when said country wants you dead.

  • Comment number 99.

    Alistair Thomas (#73): "These solutions are not deployed because they cannot be manned by US labour and their is some legislation that enforces this (Jones law from 1928 or some such)."

    White House press secretary Robert Gibbs has said that the Jones Act has not been a problem. This incident has given those who have always opposed the Jones Act an opportunity to trot out their arguments against it. The discussion of the Jones Act is just politics.

  • Comment number 100.

    ninetofivegrind (#98): "So what would stop BP from writing a cheque for $75 mill (apparently its legislated liability), ..."

    The $75m liability cap (which does not apply to cleanup costs) is void if it is found that BP was grossly negligent or if they violated any relevant safety regulation. If BP had attempted to claim this limit, I expect there would have been a concerted attempt by the US government to show that it should not apply.

 

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