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David Cameron is to discuss the oil spill crisis with President Barack Obama after shares in BP plunged to their lowest level in more than 13 years this morning.
A spokesman for the prime minister said he was "sure" that the pair would speak about BP during a telephone call this weekend, in a further sign that the Deepwater Horizon disaster has now escalated into a political issue.
"The prime minister understands that there are many people who are angry and emotional about what has happened," said Cameron's official spokesman.
BP share price graph BP's shares have plunged over the past three months. Source: Thomson Reuters
"This is an environmental tragedy and the impact will be much broader than the environmental impact, and that is why we are encouraging BP to find a solution as soon as possible," he added.
Investors rushed to offload BP shares when trading began today, as fears grew over the future of the company. The oil giant's shares dived 11% to 345.15p in early London trading, their lowest level since April 1997, as analysts predicted that it will be forced to cut its dividend payout.
They then clawed back some of these losses as stockbrokers speculated that BP could fall to a takeover bid from Chinese firm PetroChina, and were down 5.5% at 370p shortly before midday.
At today's low BP had lost 47% of its value since the Gulf of Mexico disaster struck, wiping around £58bn off the market capitalisation of one of Britain's biggest companies.
The cost of insuring BP's debt against default also rose sharply this morning, as concern grew that its long-term future was under threat. The credit default swaps on BP's short-term debt have now leapt to the level of a junk bond, research firm Markit reported today.
This morning's sell-off came after the US government intensified the pressure on the company by demanding that it pays the wages of thousands of American oil workers laid off since the Deepwater Horizon rig exploded. BP moved to reassure the City that it has enough cash to deal with the disaster and in a statement released before trading began, said it was "not aware of any reason which justifies" a 15% plunge in its share price on the New York stock exchange last night.
But traders said that President Obama's stinging criticism of BP was alarming investors, and bolstering fears that the company could be forced to cut its dividend.
"The best we can hope for is a postponement of what should be a very decent dividend," predicted David Buik of BGC Partners.
Evolution Securities agreed that BP was likely to suspend payments to shareholders until the leaking well had been permanently capped, in an attempt to assuage some of the anger felt against the company in America.
"Unilateral action against BP over its US operations, be it unreasonable or illegal, hangs over BP. Short-term dividend suspension looks a prudent move to protect BP's US asset base," said Evolution analyst Richard Griffith.
Last night US associate attorney general Thomas Perrelli said that the justice department was considering issuing an injunction to block BP from paying a dividend.
"We are looking very closely at this and we are planning to take action," he told a congressional hearing.
BP's dividend is worth $10bn (£6.9bn) a year – around a seventh of the total payout to shareholders from the FTSE 100.
Investment bank Standard Chartered has argued that it could make economic sense for PetroChina to acquire BP, although they conceded that political pressure could make such a deal impossible to complete.
"We expect China would support such a deal, while regulators in the US may raise antitrust concerns. While we cannot rationalise any argument that the deal should be blocked on grounds of national interest, local politicians may take a different view," they said in a research note published today.
Buik agreed that PetroChina would be thwarted if it attempted to buy BP. "Hell has a better chance of freezing over than Obama agreeing to China drilling in the Gulf of Mexico," he said.
Boris Johnson weighs in
Yesterday the White House said it would press the company to pay the salaries of staff laid off as a result of a six-month moratorium imposed by the Obama administration on exploration activity in the gulf. The freeze means a halt to work on 33 existing oil rigs, affecting thousands of jobs.
"It is an economic loss for those workers and those are claims that BP should pay," said White House press secretary Robert Gibbs last night.
BP also told shareholders this morning that its total spending on the clean-up operation has now hit $1.43bn, with another $300m promised to complete a series of sand banks off the Louisiana coastline.
The British government has maintained a low profile over the oil spill, but two Conservative politicians have gone public with their views. London mayor Boris Johnson accused President Obama's government of "anti-British rhetoric", warning that the slump in BP's share price was bad news for UK pensioners.
"I would like to see a bit of cool heads rather than endlessly buck-passing and name-calling," Johnson told BBC Radio 4's Today programme.
"When you consider the huge exposure of British pension funds to BP it starts to become a matter of national concern if a great British company is being continually beaten up on the airwaves."
It has emerged that BP's contingency plan to handle an oil spill in the Gulf of Mexico was riddled with errors, including naming a deceased scientist as a recommended expert. Johnson, though, suggested that BP should not be blamed for one of the worst manmade environmental disasters in America's history.
"It has presided over a catastrophic accident, which it is trying to remedy," Johnson said. "But ultimately cannot be faulted because it was an accident that took place and BP, I think, is paying a very, very heavy price indeed."
Lord Tebbit, the former government minister, also criticised Obama's attacks on BP and its management.
"The whole might of American wealth and technology is displayed as utterly unable to deal with the disastrous spill – so what more natural than a crude, bigoted, xenophobic display of partisan political presidential petulance against a multinational company?"
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David Cameron to discuss BP crisis with Barack Obama as shares plunge | Business | guardian.co.uk
there's alot to be amazed at about this.
first off i am quite sure that the same folk who were going after obama for "lack of leadership" are now saying that he's exercizing perhaps too much leadership or maybe that he's now picking on poor bp...
regardless what i think is happening is that investors are finally starting to panic. because they aren't rational beings, really. and markets aren't rational places. you wouldn't think it necessary to say things like this, but sadly...
its a massive political problem, one that's a mile deep and has had plumes reported many miles away and so it kinda follows that bp's share prices have gotten covered in oil and are now choking on the beaches of the london bourse. and we're rounding the corner into another bizarre-o aspect of petro-capitalism:
so a massive oil corporation, one of the largest corporations in britian and one of the main players in the oil industry, through whatever combination of factors finds itself responsible for a disaster of unprecedented proportions and under pressure to address the problems this disaster has caused is causing will continue to cause for a range of stakeholders in the region affected. this disaster has become so big, gone on so long in significant measure because of corporate irresponsibility---but a type of irresponsibility that was symmetrical with the exigencies placed on petro-capitalist actors by the petro-capitalist state---so pretty lax in some ways as it turned out---but all the same the oil corporation benefitted the shareholders benefitted on and on.
the problem now is that with the shares taking a real pounding and actual danger emerging for the larger corporate person (or more exactly the agglomeration of corporate persons)....we are starting to see a version of the "too big to fail" canard. the quote from lord tebbit at the end of the article, which i put in bold because it's just too funny, is a salvo in this direction. but more directy and obviously, the uk government is starting to flip its shit because bp has created for itself a disaster so big that there is a real possibility of the whole of it getting sucked down the drain.
welcome to the reality of captialism, the one behind the endless blah blah blah of the american single party state with two right wings squabbling over tactics. the dominant political order and the dominant economic order are the same. divisions between political viewpoints are divisions over tactics. you see this reality only rarely because it's built into infrastructure and other flows.
but watch as this dimension of the catastrophe in the gulf unfolds.
make some popcorn.
this could get interesting.