BP
There are now many threads to this. First let us deal with what the tabloids call anti-British rhetoric. This is the American style to round on people to blame. They do it with each other and they do it to outsiders. It is their culture. Their history shows them on the one hand generous, caring, supportive and pioneering and on the other it shows them to be confrontational and demanding. They are sometimes better at making enemies than they are at making friends.
At this moment they have an environmental catastrophe on a scale we cannot comprehend with consequences and costs which nobody can begin to estimate. They are angry and hurting and spoiling for a fight. We must not give them one. Cameron knows this. In public he has been restrained. He should ignore the tabloids and carry on that way.
In private and it must stay private, he can, if he thinks fit, say to President Obama when he talks to him on the phone tomorrow that BP is an international company originating and based in Britain but with a big block of US shareholders amounting to about a third of the equity (and therefore the dividends), that the companies contracted to do the drilling which went wrong were all American and that it was US regulators that sanctioned drilling beyond the limits of technological control and they did so to meet the ever increasing demand for gasoline to feed the excessive consumption of American motorists in their giant cars who refuse to change their ways. Finally he should warn that the British as a nation are slow, near impossible, to anger, but when they get angry they get very angry indeed.
On now to BP itself. It contracted out without proper supervision a dangerous project and had no plan in place should the worst happen. When it did it was slow off the mark. It under-estimated the scale of the leak, now believed to be around 30,000 barrels a day, at 5000. Thus it tried initial capping and blocking processes that would not and did not work. Finally it managed to tap the flow and capture about half, amounting to 15000 barrels a day, but had no suitable vessels in place to receive such a volume, so now is having to discharge some of it back into the ocean, pending the arrival of tankers. We are now over 50 days in to the crisis and it goes on. Meanwhile an environmental disaster is becoming a calamity.
This is not a good report for BP. On the plus side it has taken full responsibility for the event and promised to pay the cost of the clean up. The chief executive has taken the flack and worked round the clock. The Chairman has been in near hiding and has been flushed out by a summons to the White House. Meanwhile pension funds in the UK relying to an excessive and imprudent degree on the dividend power of one share, face a potential problem of liquidity. There are complaints that BP compensation arrangements to the stricken fishermen and others are both slow moving and too mean.
Before this leak can finally be stopped by relief wells, more weeks will pass. By then things for BP are going to begin to look ugly. It must defer payment of any dividends until the extent of its liability is known and the leak is stopped. It would be wise, to forestall a gusher of law suits unknown even in the prolific legal economy of the U.S, to offer to the US authorities a massive cash fund for the authorities to administer and distribute of something in the order of several billion dollars in return for some ring-fencing from open ended law suits lasting generations. Cleaning up the Gulf of Mexico, making good the damage and compensating everybody whose livelihood has been compromised directly or indirectly is a mammoth project of a scale not yet evaluated.
The alternative could be far far worse. According to a Texan oil expert and former Bush adviser, the potential costs of the clean up and all the contingent liabilities which BP has pledged to meet and which the fuming Obama administration has asserted it will pay, might very well drive the company into Chapter 11 as the only route open. In other words if the total picture of actual, developing, potential and contingent liabilities is taken in sum, BP may be technically bust.