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Oil Spill Puts Financial Pressure on BP

July 11th, 2010 at 05:51am Under Economy Report

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This is the VOA Special English Economics Report.

BP is one of the world’s largest energy companies. It reported a profit of about six billion dollars in the first three months of this year. That was more than double compared to a year ago.

Now, BP faces growing political pressure over the worst oil spill in American history. Oil has been flowing from its damaged well in the Gulf of Mexico for almost seven weeks.

But the company formerly called British Petroleum also faces growing financial pressure. Investors fear the long-term costs for cleanup, recovery and fines. BP’s market value fell more than sixty billion dollars as its share price fell by as much as a third.

On Thursday BP was finally able to cut a damaged pipe at the well using robotic vehicles. The cut was not exactly as hoped, but it was progress. Crews then turned to placing a cap over the pipe — not to stop it, but to direct at least some of the oil to ships on the surface. The leak is about one thousand five hundred meters under the sea.

Yet it may not be fully controlled before August. Workers are drilling two relief wells in an effort to ease pressure on the damaged well.

The White House said President Obama is returning to the Gulf on Friday for his third visit since the disaster began. The Deepwater Horizon, an oil and gas drilling rig, exploded on April twentieth.

This week, Attorney General Eric Holder announced criminal as well as civil investigations.

ERIC HOLDER: “The Department of Justice will insure the American people do not foot the bill for this disaster and that our laws will be enforced as much as possible.”

By some estimates, the cost of the cleanup could reach thirty-seven billion dollars.

The owner of the rig, Swiss company Transocean, has asked to have its responsibility limited to twenty-seven million dollars. The request is based on a law from eighteen fifty-one. But the Justice Department says that is not enough.

The government could also use violations of other federal laws such as the Clean Water Act to collect money for the spill.

Oil has already reached more than one hundred kilometers of coastline in Louisiana, Mississippi and Alabama. And it threatens the west coast of Florida.

Areas of the Gulf have been closed to fishing. But job losses in the fishing industry are not the only worry. The Atlantic hurricane season officially began Tuesday. Some people worry that officials could take their land if it becomes polluted by oil in a storm.

ONE RESIDENT: “If it gets on land, will they make us leave?”
ANOTHER RESIDENT: “If we have a hurricane and the oil washes over the land, they will condemn it. We’ll lose our homes, we’ll lose everything.”

And that’s the VOA Special English Economics Report, written by Mario Ritter.  I’m Steve Ember.

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Looking Back: Wall Street, a Year Later

January 21st, 2010 at 08:23am Under Economy Report

This is the VOA Special English Economics Report.

One year ago, the United States financial system was in danger of collapse. One of Wall Street’s oldest investment houses had just sought protection from its creditors. The Lehman Brothers bankruptcy on September fifteenth was a shock to the system, but not the only one.

Lehman Brothers’ headquarters in New York City on the day the company filed for bankruptcy

A week earlier, the government had seized Fannie Mae and Freddie Mac. These companies help finance most American housing loans. And one day after Lehman’s failure, the government decided that the huge insurer A.I.G. was too big to fail. The Federal Reserve rescued the American International Group with an eighty-five billion dollar loan.

But soon, credit markets around the world slowed to a halt on fears about the health of banks. By early October, Congress passed the Troubled Asset Relief Program, a rescue plan for the financial system.

Banks and other financial companies have received more than two hundred billion dollars. But ten banks agreed in June to repay almost seventy billion of that. And so far, the government has earned about four billion on its investments.

But taxpayers still own almost eighty percent of A.I.G. They also hold big shares of Citigroup and a number of other banks, as well as sixty percent of General Motors.

On Monday, the anniversary of the Lehman collapse, President Obama renewed his call for reform of financial supervision. He said in a speech on Wall Street that some of the “old ways” that led to the crisis have already returned.

BARRACK OBAMA: “That’s why we need strong rules of the road to guard against the kind of systemic risks we have seen. And we have a responsibility to write and enforce these rules to protect consumers of financial products, taxpayers, and our economy as a whole.”

Fed Chairman Ben Bernanke said Tuesday that the recession “is very likely over at this point.” But he said the labor market could remain weak through next year.

Next week, leaders of the world’s largest economies will meet in Pittsburgh, Pennsylvania. They will discuss economic policies and ways to strengthen financial regulation after the crisis. But the Group of Twenty summit also comes as the United States and China face a growing trade dispute.

Last week the Obama administration placed high import taxes on Chinese tires. The aim is to stop what American officials call a “harmful” increase in tire imports. China, in turn, said this week that it will investigate imports of American chicken products and auto parts. China also asked the World Trade Organization to intervene, to avoid a trade war.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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