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BP’s deepwater debacle is shaping up as Lehman Brothers in the oil patch. The toxic ingredients that led to that Wall Street firm’s implosion are abundantly present in the British energy giant’s Gulf of Mexico fiasco: flawed risk management, systemic hazard and regulatory incompetence.
And as in the financial industry, the policy response will almost certainly lead to energy’s biggies getting even bigger.
At first blush, the tricky business of drilling oil a mile below the ocean would seem light years from the pin-striped work of investment banking. But fundamentally, the failures of BP’s management to prepare for, and then handle the current crisis, evoke striking parallels with those of the bust securities firm.
Nowhere is this more evident than in the realm of managing their respective risks. BP’s failure to prevent — and so far stop — the leak on the Deepwater Horizon suggests the company did not adequately prepare for the possibility of a spill — a risk that Chief Executive Tony Hayward put at “one in a million.”
BP will pay all costs of oil spill
British Petroleum announced Monday it intends to pay economic damages beyond the current liability cap.
Claims are expected to exceed the $75 million liability cap for damages, and BP chief executive Tony Hayward confirmed Monday "we are prepared to pay above $75 million on these claims, and we will not seek reimbursement from the U.S. government or the Oil Spill Liability Trust Fund," he said in a letter to Interior Secretary Ken Salazar and Homeland Security Secretary Janet Napolitano.
"We will expeditiously, responsibly and fairly pay those claims described by Congress in the OPA statute," Hayward wrote in the letter.
Hayward was responding to a letter from Salazar and Napolitano sent last week asking him to clarify his intentions.
A tweet this morning by BP said the "$75 million is applicable."