BP – Having its own credit(ability) crunch?
At the time I am posting this blog the latest news is that BP are just starting to contain some of the leaking oil in the Gulf area. So it’s time to review how the markets and others have responded to this disaster.
The share price has fallen by 32% and it appears that the market over reacted. Why have they done this? The cost of the clear up and compensation will not affect BP’s ability to earn profits in the future. BP is not a brand that will be affected by these events, does the market think that international oil traders are going to stop buying oil from them, and that you will not buy their gas?
The US government has been sidelined, admitting that BP are the only people that have the expertise to deal with the problem. The press have been regulated to critisizing Obama for not being upset enough.
Those people that are directly affected by this disaster are right to be worried and concerned about the effect on their lives. There is a process of compensation to deal with this. Some may argue that they are very lucky to be compensated for suffering a loss from a business risk that they took, whether the risk was knowingly or unknowingly taken. In the UK many farmers became millionaires over night when their herds were destroyed to prevent the spread of foot and mouth disease. They were able to consider an early retirement, or at least a good holiday.
The sight of birds and animals covered in oil is heart breaking, but how does this fit into Darwins theory of natural selection, one animal (human being) is surviving at the expense of another.
But is BP incompetent or unlucky? Most organisations as big as BP have more to lose than the financial cost. Like the banks they cannot be allowed to fail, they know this and governments know it too. So is the biggest issue for them creditability? The need to maintain creditability drives change and improvement. So from this disaster change will come and the world becomes a safer place.
To believe that every person, every company, every politician can be right every day in every decision they make is unrealistic. All of us take personal and business risks every day, because being perfect and eliminating risk is impossible.
So BP should be judged by how it has responded and how it develops from this situation, not by the fact that it happened. Oh, and the idea that we levy a financial penalty on BP is only to satisfy a public need to believe that someone must be accountable and made to pay, in other words vengeance.