Small Businesses Take a Bite Out of Big Oil

BP PLC is back on the claims chopping block for billions more.

Mar 11, 2014 at 9:15AM

Bp Settlements

Source: U.S. Coastguard; BP PLC's Deepwater Horizon burns on April 21, 2010 

Nearly four years after BP PLC (NYSE:BP) spilled four million barrels  of oil  into the Gulf of Mexico, the company is still paying for its crime. A new ruling by the Federal Court puts Big Oil on the line for billions more as small businesses stick it to the man.

Keep on Claiming
BP PLC can't catch a break. A federal appeals court rejected the oil company's request last week to reconsider thousands of claims that BP PLC states have nothing do with spilt oil.

Speaking with The Wall Street Journal, BP Spokesman Geoff Morrell iterated his company's disagreement with the finding that spill settlement claims are being properly administered. Mr. Morrell's words should come as no surprise to those following the saga.

BP PLC is tired of being taken out to dry, and has launched a public campaign questioning the validity of claims against it. The company even took out full page ads in The Wall Street Journal, The New York Times, and the Washington Post , giving real-life examples of small business claims it views as fraudulent:

Bp Plc Settlement

Source: BP PLC, www.thestateofthegulf.com 

Nightmares such as this claim continue to push costs up for BP. Ironically, its predicted settlement costs have expanded much in the way its own estimates of total barrels spilt continued to grow in the days and weeks following the disaster.

While BP PLC originally put total payments at $7.8 billion, this latest ruling is expected to add on another $1.4 billion to BP's bill .

Don't Cry Over Spilt Oil?
If BP PLC's depiction of the above claim is correct, it may have a reason for wanting to reign in claim settlements. According to its own estimates, the company has already handed out over half a billion dollars to "undeserving claims ."

But if anyone should understand margin of errors, it's BP. Oil rigs carry risk, and so do claims. BP will never recover every drop of oil spilt into the Gulf of Mexico, and it shouldn't expect settlements to always flow smoothly. While the company claims there's half a billion bucks being distributed to the wrong awardees, the current actual tally (from BP's own website) puts fraudulent cases at much lower numbers.

Bp Plc Fraud

Source: BP PLC, www.thestateofthegulf.com 

That means, according to BP's estimates, the Attorney General and government have only managed to identify 1.9% of all false claims, in terms of dollar tally . The government may not be known for its effectiveness, but failing to identify 98% of all false claims might be a bit of an exaggeration on BP's part.

Where to From Here?
Uncle Sam has shown his support for small businesses. And once again, it's at the expense of Big Oil. Ultimately, no one but the claimants will ever know how many dollars pulled from BP's pockets should've stayed there.

BP PLC has worked hard to diminish the effects of its spill. The company has spent around $26 billion total to pay out claims, clean up oil, and restore affected areas . But while BP PLC notes that "no company has done more to respond to an industrial accident ," it doesn't mention why: its industrial accident also happens to be the worst offshore oil spill ever in the United States .

Looking ahead, these latest cost increases won't bankrupt BP PLC. With $376 billion in sales and $11.8 billion in profit for 2012 , this oil company should keep on expanding.

Rather, this latest court ruling will serve as a continued warning to corporations everywhere: revise your cost-benefit analyses today, or be prepared to be unpleasantly surprised if things ever go sour.

The Enemy of OPEC

Oil companies have plenty of enemies-and some can pull major profit for your portfolio. Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

Justin Loiseau has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers