“It’s got the real smell of death”

And no, we are not talking about the seas of the Gulf of Mexico, where an unknown amount of wildlife is dying and will die due to BP’s oil spill.

And no, we are not talking about the nationally renowned wetlands of Louisiana where the oil is having an unseen effect like an undiagnosed cancer.

What we are talking about it BP itself. The once proud bastion of British Industry, whose share-price is in free fall, its credibility is shot, its senior management are a reviled laughing stock, and its future is in the balance.

The company faces thousands of civil lawsuits and now a federal criminal investigation. The vultures are beginning to circle over the dying, oiled carcass of BP.

Yesterday, I blogged that it was time for Tony Hayward to go. But, even in 24 hours we have gone beyond that.

“Everything is spinning out of control,” argues Edward C. Chow, a senior analyst at the Center for International and Strategic Studies.

“How do you restore that confidence with the same team? I am not sure. The board has to look at whether the top management is up to the task or not.”

“This situation has now gone far beyond concerns of BP’s chief executive Tony Hayward being fired or shareholder dividend payouts being cut,” argues Dougie Youngson, at the stockbroker Arbuthnot.

“It’s got the real smell of death. This could break BP. Given the collapse in the share price and the potential for it to fall further, we expect that it could become a takeover target, particularly if its operating position in the US becomes untenable.”

Elsewhere at the firm one stockbroker said the disaster “has a real possibility of breaking the company”.

Since the Deepwater Horizon drilling rig exploded April 20, the company has lost a third of its market value, or about $75 billion.

Yesterday, the company’s share price was in free fall – its worst day’s trading in two decades as some $17 billion was wiped off the company’s share price, panicking investing but also pension fund holders.

President Obama vowed to bring to justice those responsible for what he called “the greatest environmental disaster of its kind in our history”.

Eric Holder, the US Attorney-General, announced a criminal and civil investigation, to be conducted by the FBI and other federal agencies.

Today, the free-fall continued. Another $3.5bn was wiped off the company’s value when trading began in London today.

Most analysts still believe the company can financially survive the spill, but at what cost? If the share prices continues to fall it could be a target for takeovers.

But more importantly is the political response from the Obama administration. Obama now has BP’s future in his hands.

Politically they will be punished for a very long time,” argues Fadel Gheit, an oil analyst at Oppenheimer & Company.

As the Independent notes: “President Obama would be forced to take measures against the group. At the moment, BP has more leases in the Gulf of Mexico than any other oil company. While the administration may be loath to confiscate them as a ‘nationalisation without compensation’, it could make a case that BP failed in its ‘stewardship of the environment’”.

Obama could invite a syndicate of other oil companies to take the leases over instead.  Given that the region accounts for some 25 per cent of BP’s total production, the impact on the company would be devastating.

And given the anger in America – there may not be much political opposition to the move.