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BP and the 1979 Ixtoc I Disaster

Written By Brian Hicks

Posted June 19, 2010

BP thinks you’re stupid.

Two years ago, BP said it could handle a spill 10 times worse than what we’re dealing with now.

And we believed them.

They said 25,000 gallons were leaking into the Gulf… and we believed them.

They now say 60,000 gallons are leaking every day…. and we believe them.

But with a cracked seabed floor — and a well that could hold 50 million barrels of oil — 60,000 is nothing more than a pipe dream.  

The spill could actually be worse than 1979’s Ixtoc I disaster — the worst accidental oil spill 50 miles off Mexico’s Gulf Coast, where more than 140 million barrels gushed into the waters (that’s about 30,000 gallons a day) until it was capped 10 months later.

(Can you imagine the oil impact if it takes BP 10 months? It’d be the second worst spill in history, following the 1991 Arabian Gulf/Kuwait oil debacle, which wasn’t even an accident. Iraqis dumped 380 million to 520 million gallons on orders… )

BP is nowhere near capping the leak or stopping the oil volcano. They can promise fixes by August… but there’s no guarantee.

It’s not as if there’s a “fix” for a cracked seabed floor.

Worse, the well could still hold 94% to 97% of its oil 60 days into this crisis. And if the current flow rate continues with that much oil still in place, it’ll take two to four years for the oil to leak out if they can’t stop it.

That alone would destroy BP.

And yet, investors think everything is okay…

What they fail to understand is that BP is toast

The announced dividend suspension will force large institutional holders and funds to sell as charters say they can only hold dividend paying securities.

BP will have to curb new projects and spending.

BP has already spent more than $20 billion — and we’re only in the first inning here. The spill is far from over. It’s far worse than even BP will tell you.

They have no real plan to stop the oil — not to mention the possibility of hurricanes and seismic activity become a factor in this disaster.

And the $37 billion total cost estimates are ridiculously low. 

Your best bet for profit

Buy BP put options with a small call option hedge for “news pops” or long natural gas. 

Natural gas is still exploding to the upside because:

  • 15% to 20% of natural gas production originates in the Gulf; the BP spill is sure to put a crimp in future production…

  • Predictions for a disastrous hurricane season and very warm weather are ahead. Hurricane season could send natural gas much higher if production is negatively impacted. The same thing is true for crude.

  • The oil spill has raised awareness of the risk of offshore drilling… and could spark more interest in natural gas as an alternative.

  • The U.S. president is now supporting a natural gas future.

But this isn’t the only opportunity to make money in this chaotic market…

Below are a few more ideas below from the pages of this week’s top-read articles in Wealth Daily and our sister publications, Energy & Capital and Green Chip Stocks.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

Real Worst-Case Scenario for BP: 20m barrels, $560b Damages
Analyst Adam Sharp refutes current “worst case” scenarios as optimistic, and argues that total costs could rise to $560 billion.

Fortunes to be Made in Mongolian Oil: This $45,000 Oil Report Could Change History
Energy and Capital‘s Christian DeHaemer explains why a single oil report could change history as Mongolia is ready to tap into its oil wealth.

Oil’s Game Changer: The BP Oil Spill Impact on the Domestic Petroleum Industry
While the BP spill may be making headlines as the greatest environmental crisis in U.S. history, this hidden story is one that could reshape the entire domestic oil industry. I’m talking about the end of offshore drilling — and how you can profit from it.

The End of Offshore Drilling?: The Oil Spill’s Silver Lining
Editor Nick Hodge explains why the BP oil spill is forcing profitable changes in the domestic fossil fuel industry.

President Obama is Wrong: Why Fossil Fuels Remain the Future; Natural Gas is the Way Out
Wealth Daily Editor Christian DeHaemer tells readers the three reasons to buy natural gas.

BP Spill to Spur Clean Energy Transition: Seven Days That Will Change the Energy Industry Forever
Green Chip‘s Nick Hodge puts forth seven days that will change the energy industry forever, and how you can profit as the transition ensues.

The World’s Last Mega-Boom Opportunity: Why Mongolia is an Investor’s Gold Mine
Mongolia is the treasure trove of resources that China needs in order to maintain its status as the world’s factory: gold, copper, coal, uranium, oil, molybdenum, tin, tungsten, fluorspar. This new report from Wealth Daily outlines what you must know before “China’s pantry is raided.” Your best shot at as much as 57 times your money is taking a position next week…

Natural Gas as a Transportation Fuel: Introducing the “Champagne of Fuels”
Green Chip Editor Nick Hodge discusses real-world energy solutions and highlights one such option: natural gas as a transportation fuel.

Behavioral Economics and Investing: How Emotions Can Lead to Investment Losses
Editor Steve Christ examines behavioral economics and investing and reveals how emotions can lead to losses.