BP Aftermath

Knock wood that there will only be an absolute minimum of oil spilt hereafter from the Deep Water Horizon Disaster.

That said, a quick reckoning, and I think the Obama Admin got this right:

My assumptions-- A leak of 80K BBL per Day with a straight line 1% reduction over 86 days to define the various captures, ruptures, and miscillaneous unknown variables (unless BP would like to submit the actual data, instead of somehow going from 1000BBL to 5000BBL to as much as 80000BBL per day-- I feel this method is fair); The fine is $4300 per barrel per day that such oil remains uncleaned;

What we come up with is just about $20BB as of today... BP you better get to cleaning!

(Here is my worksheet [sorry it didn't come out that great, but gotta go]:

Days BBL/dayTOTAL BBLs in MM gal Fine in $MM TOT Fine $BB
1 80000 80000 3.36 $344.00 $0.34
2 79200 159200 6.69 $684.56 $0.68
3 78408 237608 9.98 $1,021.71 $1.02
4 77624 315232 13.24 $1,355.50 $1.36
5 76848 392080 16.47 $1,685.94 $1.69
6 76079 468159 19.66 $2,013.08 $2.01
7 75318 543477 22.83 $2,336.95 $2.34
8 74565 618042 25.96 $2,657.58 $2.66
9 73820 691862 29.06 $2,975.01 $2.98
10 73081 764943 32.13 $3,289.26 $3.29
11 72351 837294 35.17 $3,600.36 $3.60
12 71627 908921 38.17 $3,908.36 $3.91
13 70911 979832 41.15 $4,213.28 $4.22
14 70202 1050033 44.10 $4,515.14 $4.52
15 69500 1119533 47.02 $4,813.99 $4.82
16 68805 1188338 49.91 $5,109.85 $5.11
17 68117 1256454 52.77 $5,402.75 $5.41
18 67435 1323890 55.60 $5,692.73 $5.70
19 66761 1390651 58.41 $5,979.80 $5.99
20 66093 1456744 61.18 $6,264.00 $6.27
21 65433 1522177 63.93 $6,545.36 $6.55
22 64778 1586955 66.65 $6,823.91 $6.83
23 64130 1651086 69.35 $7,099.67 $7.11
24 63489 1714575 72.01 $7,372.67 $7.38
25 62854 1777429 74.65 $7,642.95 $7.65
26 62226 1839655 77.27 $7,910.52 $7.92
27 61603 1901258 79.85 $8,175.41 $8.18
28 60987 1962246 82.41 $8,437.66 $8.45
29 60378 2022623 84.95 $8,697.28 $8.71
30 59774 2082397 87.46 $8,954.31 $8.96
31 59176 2141573 89.95 $9,208.76 $9.22
32 58584 2200157 92.41 $9,460.68 $9.47
33 57998 2258156 94.84 $9,710.07 $9.72
34 57418 2315574 97.25 $9,956.97 $9.97
35 56844 2372418 99.64 $10,201.40 $10.21
36 56276 2428694 102.01 $10,443.39 $10.45
37 55713 2484407 104.35 $10,682.95 $10.69
38 55156 2539563 106.66 $10,920.12 $10.93
39 54604 2594168 108.96 $11,154.92 $11.17
40 54058 2648226 111.23 $11,387.37 $11.40
41 53518 2701744 113.47 $11,617.50 $11.63
42 52983 2754726 115.70 $11,845.32 $11.86
43 52453 2807179 117.90 $12,070.87 $12.08
44 51928 2859107 120.08 $12,294.16 $12.31
45 51409 2910516 122.24 $12,515.22 $12.53
46 50895 2961411 124.38 $12,734.07 $12.75
47 50386 3011797 126.50 $12,950.73 $12.96
48 49882 3061679 128.59 $13,165.22 $13.18
49 49383 3111062 130.66 $13,377.57 $13.39
50 48889 3159951 132.72 $13,587.79 $13.60
51 48400 3208352 134.75 $13,795.91 $13.81
52 47916 3256268 136.76 $14,001.95 $14.02
53 47437 3303706 138.76 $14,205.93 $14.22
54 46963 3350669 140.73 $14,407.88 $14.42
55 46493 3397162 142.68 $14,607.80 $14.62
56 46028 3443190 144.61 $14,805.72 $14.82
57 45568 3488758 146.53 $15,001.66 $15.02
58 45112 3533871 148.42 $15,195.64 $15.21
59 44661 3578532 150.30 $15,387.69 $15.40
60 44215 3622747 152.16 $15,577.81 $15.59
61 43773 3666519 153.99 $15,766.03 $15.78
62 43335 3709854 155.81 $15,952.37 $15.97
63 42901 3752756 157.62 $16,136.85 $16.15
64 42472 3795228 159.40 $16,319.48 $16.34
65 42048 3837276 161.17 $16,500.29 $16.52
66 41627 3878903 162.91 $16,679.28 $16.70
67 41211 3920114 164.64 $16,856.49 $16.87
68 40799 3960913 166.36 $17,031.93 $17.05
69 40391 4001304 168.05 $17,205.61 $17.22
70 39987 4041291 169.73 $17,377.55 $17.39
71 39587 4080878 171.40 $17,547.77 $17.57
72 39191 4120069 173.04 $17,716.30 $17.73
73 38799 4158868 174.67 $17,883.13 $17.90
74 38411 4197280 176.29 $18,048.30 $18.07
75 38027 4235307 177.88 $18,211.82 $18.23
76 37647 4272954 179.46 $18,373.70 $18.39
77 37270 4310224 181.03 $18,533.96 $18.55
78 36898 4347122 182.58 $18,692.62 $18.71
79 36529 4383651 184.11 $18,849.70 $18.87
80 36163 4419814 185.63 $19,005.20 $19.02
81 35802 4455616 187.14 $19,159.15 $19.18
82 35444 4491060 188.62 $19,311.56 $19.33
83 35089 4526149 190.10 $19,462.44 $19.48
84 34739 4560888 191.56 $19,611.82 $19.63
85 34391 4595279 193.00 $19,759.70 $19.78
86 34047 4629326 194.43 $19,906.10 $19.93 )

The Shame of Big Oil

Here is the rhetorical question: Imagine if you will the Blob from the 1950's movie of the same title, and it was sweeping the streets removing only the gas stations, refineries, offices, and production facilities of every oil company that existed in five states.

How much money would the oil industry collectively spend to stop the Blob? How fast would that private action (without any help [or probably permission] from the Government-at-large) be done?

Now, if instead of "blob," we read massive uncontrolled oil gusher; we replace the streets with the Gulf of Mexico; and instead of oil companies we read: every fisherman, much of the tourism, a lot of recreational dollars, and the future health of millions of people-- not to mention the immense and incalculable devastation to our aquatic creatures and ecosystems-- we must wonder.

Is it not in every oil companies interest to assist in solving this problem ASAP so as to be able to have opportunity at future access to public waters?

As for BP: It was different to hear within the first days of this tragedy, that BP will honor all reasonable economic claims. That said, sending claimants out to help with the clean up and containment without proper safety (equipment, training, resources, etc.) is in some ways worse, because then they shall have several claims as a class action: (1) economic, and (2) health.

It seems there will probably be many levels of costs for BP, Halliburton, et. al.: (A) immediate, (B) long-term, (C) Criminal claims, (D) Civil penalties, and (E) future opportunity costs.

I also want to make the statement that this situation is not as advertised or spun, "Obama's Katrina." Bush got a four day notice, and if memory serves did nothing for an additional four or so days. When he did it was to reassure people, as opposed to acknowledge the tragedy. That tin ear populism was what created (along with catch phrases like, "heckuva job Brownie,") the sink hole of political legitimacy for Bush.

Pubs and haters praying for this to suddenly be Obama's Katrina are going with the old 'argumentum ad naseum,' again, but more startling is their admission that in this (and on several other issues like the economy) matter their last leader with a fully stacked Pub Congress flubbed on issue after issue. I think with the foot falling and the Tea Parties it is clear that the Pubs havent gotten out of circular firing squad formation quite yet....

This situation was precipitated by the Bushies, and the only problem I have with Obama (Administration) is that they did not catch the paper tiger collusion between MMS and Big Oil before it came to this.

So, now as far as I am concerned, we the people must ask the oil companies to verify and prove the statements they made in writing to our governmental bodies in order to acquire permits. If they claim this situation happens only once every 30 years, then they must show they have what it takes to either improve techniques and/or possess the technological wherewithal to mitigate even the slightest damage to our public lands and natural resources.

As far as I am concerned, even the fishermen are missing the bigger picture: they should not just ask for a years wages, or another job... What about charging wholesale prices for every pound of shrimp, dolphins, fish, crabs, clams, crawdads, mollusk, etc. that has been "eaten" by this blob; and what about all the future costs for the billions of creatures that have been aborted in this man made catastrophe facilitated by a chain of fools.

Finally, it is hard to write this knowing I am on track to have to fill up at the gas station in about a week. We are all conspirators at some level of this tragedy, but imagine how much this will cost the tax payers total. It is probably a very incalculable number like say $208,972,340,000.00, just to pick one out of the hat. We have dozens of these rigs out there. If we would just spend that $208,972,340,000.00 x 12 to facilitate electric cars, improved clean technology, solar, and wind, then would we not be in this mess when the next one is due in thirty years or less?

Punting

Punt: A kick in which the ball is dropped from the hands and kicked before it touches the ground. What the Fed did this week.

Punt: Chiefly British Slang. To gamble. What has been happening to Oil and Gas futures.

Strong criticism today;

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml

Echoing the RBS warning;

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

Right or wrong there was no way the Fed would win. There has been a systematic abuse of the available market levers by the Fed (http://www.marketoracle.co.uk/Article1429.html), aside from searching for and getting (http://www.mutualofamerica.com/articles/CapMan/March08/econperspec308.asp) more smoke or mirrors, they are attempting to get a couple of other tools; http://www.forbes.com/afxnewslimited/feeds/afx/2008/06/19/afx5133293.html

If the Fed is a farmer, then it has water (interest rates) and fertilizer (government bonds). If the weather doesn't cooperate, then it is possible to have a bad crop. Expanding the metaphor, somewhere along the way people got confused and thought the central bank could control the weather.

Amidst all the other doom and gloom... We are officially in Lemming Tortoise Mode.

Allow me to elaborate. In markets, there is a herd mentality. Markets are in part or whole psychological, for instance, it is estimated the supply-demand quotient for a barrel of oil is actually about 70 ~ 75 $/bbl, as opposed to its market value of 140 ~ 150 $/bbl, or about 50%. In other words half the cost of oil is market psychology.

To get into some finer points, many would argue that only some of this psychological half is pure panic, fear, or irrationality, and they come up with ideas like "risk premium," as a fancy way of saying that the Nigerians and Venezuelans may stuff up the supply demand balance-- still fear to me, just slightly more fact based fear. Watch the Secretary General of OPEC deny the supply issue;



And just to assuage the markets the Saudis agreed (http://rawstory.com/news/2008/Minister_Saudi_Arabia_can_increase_oil_0622.html) to yet again increase the supply of oil (no mind that USA refineries are at capacity). So what the hell is going on here?

One mans humble opinion (my speculation to the speculators) dont be the last batch of lemmings off the cliff. Speculators are driving the dark market for oil futures, creating scarcity of PAPER NOT OIL! Those last batch(es) of paper-buyers, whomever they may be or become, and this event may be gradual, or sudden, and may take a week, or a year, will be left covering the short on all those futures. The real price of oil has already pooled massive amounts of money to the big corporations for years and years.

Tortoise and the Hare.

Big money, real money, old money, and their followers who tend to also have large pools of money have long ago retreated from many segments of the market. Like lemmings they buy when the market is up, and sell when the market is down... When one goes they mostly all go, hence lemmings... and in spite of government adjusted numbers the smart money understands we are already in a technical recession;

http://www.shadowstats.com/alternate_data

The market is down, and most of the liquidity is Safely tucked away in secure issues with minimal risk... in one version of Tortoise Mode, or another.

In Tortoise Mode the banking families go into their wheel house and invest in banking, the real estate families start land banking, and the oil companies... (hate to paint individuals with the following broad and unsavory brush) well lets just say their presidency is coming to an un-sanctimonious end. This means for a limited time only, there is an opportunity to (a) get "no-bid" contracts from the government in Iraq (http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html?hp); (b) run up the price for gas on the claim that gas prices are contingent upon oil prices, supply is tight for oil, and demand exceeds supply for gas; (c) not having to parry market forces, and this is evidenced by their well known and publicly traded record profits (and to any who would call themselves a true free-market capitalist I defy you to explain why the oil companies collectively haven't had to absorb the "production costs" of inflated prices for oil like any other producer in the open market [and by the way where is the competition {you know the gas company that charges less for lower quality gas, etc.}]); and (d) I speculate that there is a re-infusion of some of this massive capital into these dark oil markets that are unregulated, and will be until something is done to turn the light on in the kitchen and watch the cockroaches scurry: http://money.cnn.com/2008/06/24/news/economy/oil_legislation/?postversion=2008062413

On this last point, it may take a month, but, probably, like the disappointing Supreme Court ruling against Exxon (where there was almost no punitive damages for the systemic criminal negligence in the Valdez spill), more like a decade or two to fully gather the facts and complete the prosecution of those traders and the speculators who are most probably buying a long call position, and then using some of their anticipated profits to pump up the market price... for the rest of those lemmings.

O, yes, real people, buying real options, in real markets, are making real money here because of this play (or series of plays). And I am totally in the dark from this humble vantage to guess as if this is just a perfect storm, coincidence, or any magnitude of conspiracy. And it doesn't matter. The laws are out of kilter, and I suggest we are witnessing the last act of a corrupt and powerful lobby that has had an administrations ear, which opened with the effusion of billions and billions of dollars from the California Economy in 2001 with the ENRON scandal.

Make your money while you can boys, because if you are the one holding those last call contracts for any penny over the real value of oil even one day after the market begins to correct itself (pending sanity, legislation, and possibly requisite a new administration).... well lets just say thats definitely something to worry about!