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BP Oil Spill: Why even $20 billion isn’t enough?

BP has made a blunder. No doubt about that! So we shall not even discuss it here. Is only BP responsible? We shall also not discuss it here. Now that BP has agreed to pay $20 billion in payments to the US Government, the main question which people are asking is …. whether $20 billion are enough? Here are some arguments why they are probably not!

  • Tourism Industry in the Gulf of Mexico: According to CNN, tourism is about 46% of the Gulf economy i.e. over $100 billion! Has the spill destroyed the tourism industry? Yes, No, Maybe? If ‘maybe’ then till what extent and how much will the loss be? The state governments are saying that the beaches are not closed but will this save the tourism industry? With photographs of wildlife soaked in crude all over the internet, will anyone realistically go to the gulf for tourism? State tourism departments are saying that they are getting cancellations as far as 3 months out. Cancellation rates are being said to be around 50%. If we do back of the envelope calculations and assume 6 months of tourism disruption and 50%  cancellations then it give us $25 billion of tourism revenue lost!
  • Unemployment: In a state with 12% unemployement (according to CNN) the after effects of the spill will likely cause more layoffs. With a major overhaul of oil & gas industry and decline in tourism industry, unemployment will spike. This can have major impact on the society near the gulf and can cause various problems. Ofcourse Government will have to take care of the situation but the costs will be very high.
  • Real Estate Decline: A natural follow-up of this has to be another shake-up in the real estate valuations around the gulf. Just when US is recovering from 2008 recession, this is not something that anyone will look forward to.
  • Clean-Up Costs: Exxon Valdrez spill occurred in 1989 near Alaska and it was an oil tanker leak! According to Exxon they spent over $2 billion in clean up costs. Looking at the scale of current oil spill plus adjusting for inflation, this will amount to atleast $5-8 billion.
  • Wildlife Loss: One of the biggest losses caused by this oil spill is loss of wildlife and natural environment. This loss is invaluable and just can’t be measured. The loss of fishes, birds, vegetation and ecological balance cannot be brought back by money! If we can just learn a lesson from this tragedy of not taking nature for granted then it would be a small step towards redemption.
  • Oil & Gas Loss: The spill will probably cause stoppage of drilling in deep sea water! This is a good step for all of us in the long term, however in short term it probably means supply shortage and higher oil prices. Because of  negligence of one company, some poor soul will have to pay extra for travel!

Ofcourse too many issues and very little explanation. Hope you enjoyed the video though.

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3 thoughts on “BP Oil Spill: Why even $20 billion isn’t enough?

  1. Pingback: Tweets that mention BP Oil Spill: Why even $20 billion isn’t enough? - Strat. In -- Topsy.com

  2. Good post, people are severely underestimating the costs that are going to come after the fact. The total legal costs of the exxon valdez incident yielded a final price tag of $41.9 billion, given the BP spill has a larger scope of impact, I wouldn’t be surprised to see their costs on the legal front to be anywhere from 5 to 15 billion more than exxon valdez. And don’t forget they still have no idea how to stop the flow. Morons. Hilarious video too by the way.

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