Cost of spill could be huge

IT IS virtually impossible to say how much the oil spill in the Gulf of Mexico will cost BP in hard cash, but the damage to its reputation could be far greater. Analysts put the final clean-up cost somewhere between $2bn and $8bn, meaning it could dwarf the $3.8bn that Exxon eventually paid to clear up the spill from its Valdez ship in 1989. Having pulled in $17bn in net income last year, BP can shoulder the painful one-off cost. However, if it is forced to slow exploration and drilling elsewhere in the Gulf of Mexico, its share price – already 12 per cent lower since the spill – could tank further. The Obama administration initially loosened regulations on drilling in the region, as part of a package of concessions to get Republicans to back a climate change bill. It is sure to reverse that position, meaning BP needs to redo its sums. Shareholders mightn’t like the new numbers quite so much.