Further Problems For BP

With its share price continuing to fall, BP’s market capitalization has now fallen by more than $100b since its oil spill in the Gulf of Mexico started. According to the oil giant, the cost of cleaning up the leaking oil has risen to $2.35b. Its market capitalisation could well sink deeper due to anticipated further increases in the cost of the clean-up operation, potential legal liabilities, the impact of the Gulf of Mexico drilling moratorium and reputation damage.

According to one analyst: “BP has so many problems and the costs of the compensation fund and the environmental cleanup fund are unknown. The containment program is not going well and BP feels like an oil tanker with no rudder or captain on the bridge.”

Another problem facing BP is that the onset of the hurricane season in the Gulf of Mexico could make capping and containing the oil spill even more difficult, and this has added to market uncertainty.

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