BP is leaking cash almost as fast as they’re leaking oil.
The company has doled out $990 million so far as a result of the oil spill that has ravaged the Gulf Coast. According to the Associated Press, the money has gone to “spill containment, relief well drilling, grants to Gulf states, claims already paid and federal costs.”
In particular, BP (Stock Quote: BP) has reportedly made more than 15,000 payments to people claiming damages from the spill, which has added up to $40 million.
To make matters worse, BP has admitted that they probably won’t be able to stop the oil leak until sometime in August when they can create a new relief well. Assuming that’s the case, some estimate BP’s costs could triple to $3 billion or more.
On top of that, BP’s stock dropped drastically following news that its “top kill” solution failed, causing the company to lose more than $60 billion in market value by June 1 midday trading. And several groups, including Ralph Nader’s organization Public Citizen, have called for consumers to stop visiting BP’s gas stations. If this movement catches on, BP could lose even more money.As it stands now, there is a liability cap on oil companies like BP, which limits the amount that these companies must pay for financial repercussions from spills to $75 million. Despite this, BP has repeatedly stated that they would foot the bill for any and all “legitimate claims,” which is why they’ve spent hundreds of millions already. That said, legislators are currently debating whether to lift the cap to $10 billion for all future spills.
Before the oil spill, BP was off to a great year thanks to rising gas prices. Their first quarter profit this year was approximately $6 billion. However, the question that many bloggers are asking now is whether the oil company will be able to survive the economic blowback from this crisis even after they finally plug the leak. Could this oil spill put BP under water?