Fool Analysts Anand Chokkavelu and David Williamson sat down to discuss the situation in the Gulf of Mexico, what it means for you at the pump, and what the future holds for BP
Unfortunately for the residents and wildlife in the region, the Gulf of Mexico continues to fill with oil. When Top Kill, the plan of using heavy drilling mud to stop the flow of oil, failed, BP went back to trying to contain as much as it could, funneling oil up to a ship on the surface for processing. Ultimately, it will likely be August at the earliest, when relief wells are expected to have been drilled, before BP gets the spill under control.
Oddly, you've actually gotten some relief at the pump over the past month or so. That's a trailing reflection of the collapse of oil prices from around $90 to $70 a barrel. What pushed oil prices down was a one-two punch of Greece/euro worries and a cooling Chinese economy. China in particular powered prices of many commodities higher in 2009, and oil was no exception, so a reversal there could bring further price reductions. On the other hand, a protracted moratorium on drilling in the Gulf could raise fears of eventual tighter supplies.
As for BP, its fate is up in the air. There's chatter about a takeover or merger, but I (David) can't imagine anyone would have an interest until the dollar value of legal liability is more defined, and there aren't many companies that could eat up BP whole. I've argued that ExxonMobil
BP looks cheap now, but with the severity of the leak unknown and the liability and cleanup costs ever increasing, it'd be prudent to monitor the situation before diving in head first.
Hit play on the video below to get the whole story. Enjoy!
David Williamson sadly owns shares of BP. Total is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool's disclosure policy gets camera-shy.