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Monday, June 14, 2010

What is BP's Liability?

what is BP's liabilityGiven some borderline demands from the US Administration, we want to know how far you think BP's liability extends. So, what is BP's liability?

The outrage of our nation and fervor of our president at the alleged negligence of BP (NYSE: BP) have all kinds of creative ideas coming out of the White House regarding the degree of responsibility BP has and its liability. BP shares have tanked, as imaginative and aggressive statements couple with logical demands emanating out of the White House - we believe at least partly to appease an enraged populace. This, in turn, has long-term purpose, to keep voters on board by positioning the President clearly on the right side of the argument (with the people against the evil oil company). Of course though, all elected officials carry the responsibility to do what their constituents want, to a reasonable degree, since the crowd should never dictate action (or else riots and massacres would increase).

Certainly, BP should have been better prepared for this catastrophic possibility, and should have resolved it sooner. Definitely, it is responsible for clean-up and retribution to business and local economies destroyed in Louisiana, Florida, Mississippi, Alabama, Texas and wherever the ugly mess extends. That means the shrimpers, fishermen and the tourism industry need to be made whole. There's no doubt about this!

However, some have issued demands around BP that are simply not constitutional, and some of these statements have come out of a White House that has raised my unibrow more than once already (talking about the Financial Crisis Responsibility Fee). The White House has no right, for instance, to demand any privately held institution kill its dividend. The Administration has increasingly insisted BP act to do so. Perhaps the government has no intention of breaking the constitutional line at all, but simply to put public pressure on BP to keep its capital in place. This would ensure it will be available in the future to meet rising damage claims.

The line is also drawn somewhere closer to BP, and farther from the White House, with regard to who pays unemployment insurance for job losses across the Gulf states. It is one thing to require a company to compensate businesses, including sole proprietorships, for the business the perpetrator destroys, and another for it to demand a private institution pay unemployment benefits. Employees and companies already pay for employment insurance as part of their ongoing operations costs; these are the reductions to employee salaries and the related indirect upward adjustment to compensation costs for businesses that must pay employees adequately to meet cost of living demands and competitive landscapes.

To our government's defense, the Administration seems to be mostly acting responsibly. It has formed a commission to review what went wrong in terms of BPs operations, government oversight and/or general regulations. As part of an official White House statement found here, the White House declared:

"We've ordered BP to pay economic injury claims, and we will make sure they deliver. The Small Business Administration has stepped in to help businesses by approving loans and allowing deferrals of existing loan payments... And we will absolutely continue to hold BP and any other responsible parties accountable for financial losses borne by the people in the region."

It's the extent of this "responsibility" that troubles me. So I demand our government be careful not to step on constitutional rights in order to serve the angry crowd. If it fails to do so, hopefully the Supreme Court will not also falter, should it be asked to review decisions made in haste in the future.

Wall Street Greek wants to know what you think about this issue.

What is BP's Liability?



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5 Comments:

Anonymous Raging Cajun said...

If the government gives BP an inch, those lousy oil fiends will take a mile. Obama has to play hard ball like he did with GM and Chrysler or else Cajuns like me will get screwed over.

12:52 PM  
Anonymous Greek said...

Cajun,

I see your point, and if it is just a PR move to get the US populace pressure on BP to save dividend funds for future damage claims repayment, then it is brilliant AND effective.

12:54 PM  
Anonymous hans said...

BP should pay a reduced dividend to show its still in business and hire an insurance company to process claims. Setting up a fund for the feds to pay out will ba a joke , any claimant is a potential voter. Time for BP's chairman to go the US way----I'll see you in court.We dont hear about 30% owner APC .BP should go through the records find out how many politicos wrote and pressured authorities to relax rules and the contrbutions received. Not of course to imply there is any connection.Time for BP to think about shareholders.

1:25 PM  
Anonymous Koufax said...

Whether BP is drilling in the gulf of Mexico or in the gulf of Guinea the liability remains with BP.I cant imagine the presidents of Nigeria,Cameroon or Angola not responding in a similar fashion to protect their land from such a disaster.The insurance and underwriters of this drill have unforseen claims ,so for the President to strongarm BP to cut the dividend to side and show good faith to the public and not the shareholder is working for the people.

2:44 PM  
Anonymous Ramsey said...

BP (British Petroleum) is COMPLETELY responsible for stopping and fixing the mess their company is making. YES, accidents happen. YES, it's hard to predict what the future will bring, especially under the ocean. But BP is responsible for any mess they make. Just like anyone else. Why haven't they simply shut off that pipeline? Are we supposed to believe they don't have EXACT blueprints of where valves are located? COME ON! Is why they are not stopping the hemorrage of oil actually based on only one valve supplies several pipelines? And because of that, they must leave it open, or risk not supplying some other money making oil machine? SHUT THE DAMNED THING OFF ALREADY! If the oil was gushing into British waters, you can BET they'd have it fixed by now.

SOLUTION 1: Pull BP's license to sell oil to the USA. SOLUTION 2: Shut down ANY BP facility that is considered "on U.S. property". Or maybe the EASIEST solution would be...simply start gathering up the oiled water and start dumping it into the Thames River. BAM!

4:48 PM  

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