News In Brief

Will BP oil spill clog economic recovery?

Melissa Kaplan May 3, 2010

The damages from BP’s oil catastrophe are fast spilling into the high billions, and experts are just beginning to project what that will do to our still-infant economic turnaround. Business Insider posted some feedback from analyst David Kotok of Cumberland Advisors, who went through some of the costs of the Deepwater Horizon and why it’s way more likely to result in a double-dip recession.

Why should the forecast be doom and gloom? Kotok looks at the situation from a numbers’ perspective:

Usually, the first estimates in any crises are too low. That is true here: 1,000 barrels a day is now 5,000, and some estimates of spillage are trending higher. No one knows exactly. The containment and boom mechanism is subject to weather cooperation as we can see this weekend. Soon we are entering the hurricane season. The thoughts of a storm stirring up the Gulf, hampering any cleanup or remediation drilling effort and creating a huge 10,000 square mile black stew is frightening to every professional in the business. This will be a financial calamity for many firms, not just BP and its partners and service providers. Their liabilities are immense and must not be underestimated. The first estimate of $12.5 billion is only a starter.

And if we were relying on more offshore drilling to help bring us back up to speed, the temporary White House moratorium on new drilling puts that idea to rest.

Do you think the oil fallout will be as bad as Kotok’s envisioning?

Check out our coverage of the BP oil spill here, and tune in to tonight’s Marketplace to find out what BP is on the hook for in the massive oil spill.

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