Well, there are yet more numbers out there describing the Gulf oil “spew.” Now, the experts are mumbling numbers like 60,000 barrels/day of oil loosed upon the wave and shore. A bit of quick math (42 gal/barrel) says that we’re looking at something like 145 million gallons total so far, or 13 times that of the Exxon Valdez.
Of course, there are so many unknowns… We don’t really know how much oil has been lost; we don’t know what nearly a million gallons of dispersants are going to do to the area; we don’t know what happens to such a deep ecosystem given the 5,000′ depth of the blow-out; we don’t know how much crude will reach the shoreline and the wetlands… But even if we simply use the 1989 Exxon Valdez spill as a rough estimate, that was still a $4.5 billion cleanup–but Pricne William Sound is still feeling the effects. Using just that yardstick today ($654/gal), we’re looking at $95 billion, though that may in fact be just a fraction of the final amount.
And truth be told, the cleanup will no doubt reach a point of diminishing returns… For example (and this is just an example), BP might be able to remediate 75% of the damage at a cost of $40 billion, 80% at a cost of $50 billion, 83% at a cost of $75 billion, and 84% at a cost of $150 billion. Put another way, there will come a time when there just isn’t enough ecological bang for the (available) cleanup buck.
“The company generated cash of $7.7 billion from operating activities in the first quarter. Even after capital investment of $3.8 billion, it had $3.9 billion of free cash and the company says it has arranged significant credit lines…
“The upper end of analysts’ forecasts of total costs is around $30-$35 billion, with potential extra costs for lost fisheries business in years to come.
“Analysts say BP may not be able to cover such costs, and pay its dividend, out of cashflow alone, forcing additional borrowing.
However, the oil giant is believed to be able to do so without bringing its gearing levels above its targeted 20-30 percent range.”
My over-priced $.02 concerning the final cost of the cleanup? I’m guessing at best $50 billion—$100 billion if we’re lucky. (Who knows what it will amount to if the relief wells flop.) As the summer slogs by watch the shenanigans, follow the money, and watch out for PetroChina. Oh goody.