Effects of Oil Spill

Deep Water, Deep Trouble, an article from the wall street journal, clearly illustrates the consequences that many players in this industry are facing as a result of BP’s “oil disaster”. First off, as a result of this oil spill many shareholders are challenging management to minimize the risk in deep water offshore drilling in every way possible. For instance, soon after the incident in the Gulf of Mexico about 50 global investors sent messages to many oil companies asking how they will responded if an offshore accident is to occur with their company. Andrew Logan, director of oil industry program at CERES, believes that investors are looking deeper into oil companies then they had in times past; currently before they make any investments they look for things such as that a “robust spill contingency plans and clear guidelines for contractor selection and oversight.” Investors are also looking deeper into the reward system at these companies to make sure that “compensation and incentive packages for senior management include specific links to environmental, health and safety targets.”
In addition to the rise in concern from investors, The U.S. Senate is working towards a bill that could potentially make oil companies liable for unlimited damages if another incident is to occur in the Gulf of Mexico. It is getting increasingly difficult for oil companies to survive when they have to balance sufficient production, focusing on the environment, and giving greater attention to safety, and if this bill is passed, becoming self-insured.


Through this article we can also see how a bad decision or complacency of one company can effect so many others in that industry. I completely agree with investors decisions to look deeper into the companies operational system before they make an investment but I think the bill the senate is trying to pass a bit questionable. If this bill is passed and oil companies have unlimited liability, it would make it almost impossible for them to be insured which will definitely create another problem.

http://online.wsj.com/article/SB10001424052748703453804575479643629599782.html?mod=WSJ_Energy_leftHeadlines