Savvy investors have questioned the future of British Petroleum (BP) since the Deepwater Horizon oil rig explosion more than 50 days ago.
Whenever a publicly traded company incurs a negative event of such magnitude, a decrease in investor confidence in either the company’s fundamentals, or the expectation thereof, will affect stock prices almost immediately. While BP’s stock was able to weather the recent oil spill better than was expected at the beginning, recent talk of nationalizing BP’s North American assets has anyone who was holding on running for the hills.
While there has been no official comment by the American government on these rumors, there remains little other option if British Petroleum North America files Chapter 11. At such a point, BP would no longer be in a position to address the oil spill, the American government would have to clean it up leaving the American taxpayer stuck with the bill. The most likely means of recovering the costs would be the stream of payments possible if the U.S. government to continued to operate BP North America. Granted, this isn’t the only possible scenario, just one of the most likely. There is always the possibility that the government would sell off BP’s assets to try recoup the massive expenditures.
Effects of these talks have already been manifested in global markets. Earlier this week, energy stocks (including BP) plunged, while precious metals, and other comparatively safe investments reaped the benefit. Gold, in fact, is trading at its highest levels ever. Similar trends are likely to continue as the story unfolds negatively for BP.