It was good to see BP agree to set aside $20 billion to pay victims of the massive gulf oil spill. This agreement came after President Obama put intense pressure on the powerful oil company to set up such a fund. The independent fund will be led by Kenneth Feinberg, the lawyer who oversaw payments to families of victims of the terrorist attacks on September 11, 2001. This appears to be a very good selection. President Obama announced the agreement in a news conference after winding up his meeting with BP executives at the White House.
The total costs to BP before this crisis is over will be huge. It’s being estimated that the total cost range will be as high as $60 billion. If the worst predictions about the oil spill come true, that figure could easily surpass $100 billion. For example, Goldman Sachs estimates that each barrel of oil spilled could wind up costing as much as $40,000 in cleanup and compensation.
While the $20 billion fund is a step in the right direction, it won’t be nearly adequate to cover the massive losses and damage caused by BP. While some question BP’s capacity to pay, that is simply not true. The giant oil company holds enough oil in its reserves to single-handedly supply the United States for two years. BP has little debt for a company of its size and makes more money than the corporate giants Apple and Google combined. BP posted $17 billion in profits last year from its vast operations around the globe, compared with $5.7 billion for Apple and $6.5 billion for Google. More importantly, in the past three years, the company generated $91 billion in cash flow from its operations. And, it should be noted that BP has 18 billion barrels of oil in proven reserves, twice what the U.S. consumes every year.
Source: Associated Press
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