Sunday, May 2, 2010

The Gulf Oil Spill Tragedy - A Nuclear Accident Equivalent

All I can say about this is that the unintended consequences will be enormous. Presumably British Petroleum is carrying full insurance coverage. The costs involved - all encompassing, not just the direct clean-up costs - will run into the $100's of billions. If you think I'm nuts, please read this analysis:  Beyond Catastrophic.

Not factored into that author's cost analysis is the likelihood that massive insurance company OTC derivatives - credit default swaps, etc. - will likely be triggered as insurance coverage is maxed out.  I'm positive none of BP's insurers ever anticipated or reserved properly for something like this. This disaster will trigger many bankruptcies, large and small.  BP itself is likely toast, if the U.S. Government exercises proper justice.

The market cap of BP as of Friday's close was $165 billion.  If Obama is doing the job he should be doing here, he should seize BP's operations, freeze all of its bank accounts and those of its senior management and board of directors.  The U.S. Government should effectively takeover the BP and seek to manage it for the goal of squeezing all possible economic value out of the Company and use that money to manage this disaster. 

Take a look at the graphic in the above-linked article.  If you own real estate anywhere along the Gulf Coast or the East Coast, your property has just lost a lot of value.  That this happened is beyond unimaginable, especially since the technology to prevent this was available and widely used throughout Europe.  There should be no mercy for BP and it's senior executives.


  1. into the $100's of billions ? LOOOOOOLLL :)))

  2. I just finished an afternoon pow-wow with some of me droogs and they thought I was nuts for expressing the very same notion. People are having a hard time understanding why they can't just cap the well. They have no idea what a mess 5000 feet of crushed pipe and wrecked rig will create and how nearly impossible it is to cap a well head underneath all that with remote vehicles. The best bet right now is a diagonal dig into the well to seal. 3 months of this thing will not only ruin all gulf coast destinations but pretty much any Caribbean location. I am normally good at forecasting cause-and-effect for a few stages of a process, which comes from may years of critical power systems engineering experience, but this has so many levels and so many areas of impact, that Black Swan (no pun intended) is written all over it. Get ready for round two.

  3. Lets fix the problem first before we takeover a foreign corporation

  4. re: the cost skeptic: read the link. That guy David Kotok is well-respected analyst and Cumberland Advisors is a well-respected investment firm.

    His number is $125 billion. You have to take into account all of the derivative lawsuits. Every person who's home value is affected will have a claim on BP.

    And the collateral affects will be enormous. This could put out a couple of BP's insurers or reinsurers.

    Before you knee-jerk laugh at that $100 billion number, you better make sure you consider how encompassing the damage will be.

  5. re: Black swan comment - agree 100%. You clearly have a logistics understanding of what's involved.

  6. re: Anonymous/fix the problem: this problem will span decades. BP needs to be seized in order to preserve the value of the corporation as much as possible. The danger is that BP starts hiding assets.

  7. On vacation (I got back today) there were about 6 people from the southern Lousiana region and they were all sick with worry about the oil spill and the fishing industry; one couple left early to go back home. I am just getting started on getting caught up.

  8. Welcome back gyc. Bet you miss the Bahamas already! It's better in the Bahamas!!!


  9. The Gulf Oil Spill Tragedy - A Nuclear Accident Equivalent

    Interesting that the word 'Nuclear' is used. I read someone ranting that only a deep nuclear blast could stop this gusher. I don't know about that, but I am not optimistic they will stop it anytime soon. We humans are pathetic.

  10. Given the Gulf Stream flow...

    Ireland and SW coast of England in a few weeks???

  11. What's left of the swaying global economy just got taken out.

  12. 100's of billions sounds about right to me Dave.

    Very uncouth to think otherwise. What does one think the Oil is just going to disperse on its own? Come on get real.

    As usual Dave spot on with your comments.

  13. Dave normally your spot on with your gold analysis but you clearly should stick with that topic. You have no clue what your talking about here. Nobody is seizing BP's operations or should they. This is called an accident. Do you think BP is happy about this? They are losing money getting bad PR and so on. Bottom line is these things have happened, do happen and will continue to happen. Exxon's stock is only over 500% plus 2 splits since the Valdez incident.

    P.S. Obama is not going to do shit.

  14. I mean just look at BP's stock. It just rocketed up as rumors are circling that BP has contained the leak. So stop acting like it is the end of the world. Stay within your circle of competence in gold. You lose credibility when you write about this stuff.

  15. I'm not saying anyone WILL seize BP's assets. And I agree that Obama is not going to do shit. All I'm proposing is what SHOULD be done in order to avoid having the U.S. taxpayer pay for this, which is what is looking like will happen.

    This accident is BP's fault and their liability. They own the well. TDW owns the rig but in business law they are BP's "agent," which means BP is ultimately responsible.

    The cost of this clean-up is going to be FAR greater than anything you are seeing reported here.

    The only way to preserve BP's asset value and it's ability to help pay for this is to take it over and manage the business for the purpose of generating funds to pay the clean-up.

    I found out after my post yesterday that BP self-insures. That makes this problem even worse.

  16. you chase rumors? I saw an interview with a BP executive earlier today the robotic method to ap the well they attempted failed. The alternative method will take anywhere from 2 wks to 3 months.

    Before you start criticizing others, you should fact-check. If I had a nickel for everytime a stock spiked higher on rumors I'b living in retirment in the Bahamas.

  17. I'm just saying that your acting like BP is going bankrupt due to this. I love your analysis of PM/gold stocks etc. However I criticize in an attempt to only be constructive to help our blog be more informative.

    Of course the tax payer is going to get it in the arse here. Don't they always??? If there is a play here it is to sell puts and buy calls on BP. The whole thing will blow over in less than 18 months.

  18. I'm on the phone right now with someone who's uncle is a long-time oil industry magnate. He told my buddy that they destroyed the valve trying to close it, that it's not 5k barrels/per day spewing out but more like 8,000-12,000 barrels per day that's coming out AND "if they are lucky, they'll get it capped somewhere w/in 45-90 days."

    Here's more quotes "it will wipe out the Gulf fishing industry." "It will be an absolute environmental disaster for the shrimp industry." "Don't believe $15 billion - the cost will be absolutely extraordinary." "The people I've been talking to (the oil magnate guy) at BP are absolutely beside themselves in trying to figure out what to do."

    This is going to be many times worse than anyone is letting on. Read the link in my post.

  19. For the record, just like OBama/Bush fucked us over with the banking disaster, I expect that they'll declare the Gulf an environmental superfund area and 10's of billions of taxpayer money will be used to clean this up, rather than BP's money, which is what should be used.

    My buddy's oil magnate uncle also pointed out that BP self-insures and that it will be problematic if Obama does the right thing and forces BP to pay for this all.

    Unfortunately, big oil's grip on our system goes back further than Wall Street's (see Rockefeller/Standard Oil) and thus we can fully expect that the taxpayers will take this one up the ass too.

  20. People have no clue how bad this is. It's already projected to hit the Florida EAST coast next week. This is going to destroy the Gulf coast and the entire east coast and is the death knell for US Empire. Watch it unfold in fear and trembling.

    Joe M.

  21. Unfortunately, Right on Joe. It's already over there. :-((

  22. Well, the supposed "rant" about using a tiny nuclear explosion seems to miss that it worked 4 of 5 times on the first try once in Russian Nat gas explosions.

    Similiar technique liberated nat gas below grade in New Mexico, now in routine production.

    Explosions like radiation enhanced aka "Neutron bombs" barely break windows in the neighboorhood a block away.

    A woods metal frit and ringed collett would seal the hole in 1/2 hour, with no detectable evidience on the surface at all. The local heating would be perfect with Cadmium in the alloy.

    The blow out protector things is a toy, a fair weather toy for show and tell in puraching you did something. These deep sea events are non trivial to manage. When the cute stuff fails, blow it out of the way and melt a plug over it, and move on, its over.

  23. Google Lyndsey Williams + listen to any interviews
    on You Tube. Last Thursday he blew the LIES apart
    for 2 hours on Alex Jones Radio Show on INFOWARS.COM I believe u can re listen to it there , and YouTube.
    They drilled a SUPERWELL deeper than any other including RUSSIANS . Dude, it is 5 -6 miles into the Earth's Crust where it hit Pressures 5 times what Eqpt could handle. ! mile is depth from surface to Ocean Floor.
    It hit after 2-3,000 FT. of solid ROCK + then hit a new STRATA of molten super hot whatever
    = Pressure has destroyed the pipes,forget the VALVES which are above ocean floor . There are hole in ocean floor all around pipehole. This is Armageddon. No way to fix including NUKING it which no one can guarantee.
    Amount of OIL is not the worst part. Per EPA report last TUESDAY 5 + Flammable TOXIC gases at 1,000times safe levels are escaping + entering the atmosphere causing Cancers , Leukemia, + Birth defects to Humans. .forget the Birds etc.

  24. Lyndsey Williams also said last Thur it is 4 million gals a day ,not barrels which is insanely more than reported . Just now a new estimate of oil flowing is on Drudgereport .COM . He gets his info from an 87 yr old guy who knows all top OIL crooks + Elites + has an impeccable record of 20 yrs. being right
    Permits should never have been granted for this deep of a SUPERWELL. Now we all know the great risks of screwing Mother Nature that deep in her HOLE ! !
    Williams should be on once a week on INFOWARS.COM with new info .

  25. If you are wise . . .do an analysis of Co.'s who will take it in the shorts from this problem. Short the stocks. People who shorted BP the next day will soon be filthy rich.
    No way BP is not filifng BK . . period

    \The BRITS are really pissed as 1/3 of stock is owned by Retired people in England. This will wipe them out . GET THIS . . . another 1/3 is owned by 401 k's etc in AMERICA. . .
    ASHES . . ASHES . . .we all fall down