Oil Disaster Hurts America More Than BP

The oil disaster in the Gulf of Mexico continues to grow larger each day, and there is still no idea when the underground oil leak might be plugged or capped so a real clean-up can begin. Marine life has already been affected and much Gulf fishing affected. It seems obvious that the coastlines of Louisiana, Mississippi, Alabama and Florida will be devastated, and now we hear the spill has split and part of it may be heading for Texas. In addition, we are entering hurricane season, and just one medium-size hurricane could help to spread the oil to places unimagined.

There's no doubt that this disaster caused by off-shore drilling will cost Americans billions of dollars in clean-up costs and lost revenue. But how about BP oil company? How are they doing? Many pundits have said this will seriously hurt BP, and some have even said they might go under because of this disaster.

Let's look at just how much BP is hurting. According to BP, they have spent $350 million in the first 20 days of the oil disaster (including $3.5 million to to settle 295 of the more than 4700 claims they have received so far). That means the oil disaster is costing them about $17.5 million each day. That sounds like a lot of money. It has to be hurting the company, right? Well, not actually.

In the first quarter of this year, BP has produced 2.5 million barrels of oil a day worldwide. It has sold those 2.5 million barrels for an average of $71.86 each. That means the company has an average profit of $93 million a day for the first quarter. That translates into over $11 billion in profits for the first quarter, and about $45 billion in profits for the year.

So the oil disaster has cost them only 18.8% of their daily profits during the first 20 days of the disaster, leaving them with 81.2% of their profits still intact. So not only has the company not been seriously hurt by the disaster, they are still making astronomical profits! And even if this disaster winds up costing them $20 to $30 billion dollars, they will still wind up with a hefty profit for the year -- a long way from showing a loss.

But I don't expect them to actually pay near that amount. Remember that Exxon was given a court judgement of $5 billion for the Exxon Valdez disaster, but only wound up paying about $500 million. And even if the company does have to pay a few billion, they'll just raise the price of oil and gas (and the other oil companies will go along with them and do the same), so the consumer will wind up with the bill.

America will definitely be hurt by this oil disaster, but don't expect that hurt to extend to the oil company. BP is doing just fine, thank you.

Do you still want to go with "Drill, Baby, Drill"?