Investors are punishing BP’s stock and related exchange traded funds (ETFs) as BP’s most recent plan to stem the oil leak in the Gulf of Mexico failed. This crisis has meant much to those who live on the Gulf, but what does it mean for investors?
Brett Arends of The Wall Street Journal says that $111 billion has been wiped off the market value of the four companies involved in the oil well disaster: BP (NYSE: BP), Andarko Petroleum, Transocean (NYSE: RIG) and Cameron International (NYSE: CAM).
Part of the loss can be attributed to the current market downturn- the S&P Global Energy Sector is down 15%. Estimates put any additional cost beyond this decline around $66 billion; worse if the oil spreads to other states, which appears to be happening.
- According to the Commerce Department, forestry, fishing and related activities for the entire state of Louisiana accounted for about $613 million in 2007. For Mississippi, it was about $609 million, bringing the total to $1.2 billion.
- The arts, entertainment and recreation businesses for the two states amounted to $3.7 billion. For the tourism business, it was $9.1 billion. (All figures are based on 2007 estimates).
- Assuming a very pessimistic scenario in which the entire fishing industry, half of the recreation industry and half of the tourist industry are wiped out, the total cost would come out to $7.6 billion a year.
- Assuming also that the cleanup costs and fines for the spill are double those related to the Exxon Valdez spill, an additional $14 billion would be added to the tab.
No one can predict how this disaster is going to end, but the after-effects will linger for years to come. There are numerous scenarios more dire than the one outlined above and other unknown factors could derail any of the four companies involved. If you’re minding your exposure to BP, John Spence of Market Watch identifies five ETFs that have at least 5% invested in the company.
- BLDRS Europe 100 ADR Index Fund (NYSEArca: ADRU) – 5%
- WisdomTree International Energy Fund (NYSEArca: DKA) – 7.5%
- iShares MSCI United Kingdom Fund (NYSEArca: EWU) – 7.7%
- SPDR S&P International Energy Sector ETF (NYSEArca: IPW) – 11.8%
- iShares S&P Global Energy Sector Index Fund (NYSEArca: IXC) – 6.4%
For more stories on oil, visit our oil category.
Sumin Kim contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.