The end of the beginning not the end

Anyone listening to the news reports this morning would be forgiven for thinking that the Deepwater disaster is somehow “over” now that that the cap seems to be holding.

So nearly ninety days in to this disaster we may be reaching the end of the beginning, but no more.

In the short-term we do not know if the cap will hold. Tests will continue over the weekend.

The good news is that even if it does not hold totally, more oil should be collected than before. The bad news is that the well bore could be leaking further down, described by one drilling expert as “the worse case scenario”.

What we know is that a permanent solution will only come when the relief well is drilled and even that is not certain of stopping the oil.

In the long-term we have no idea what the damage will be to the ecosystem and fisheries of the Gulf of Mexico. How can we? We don’t even know how much oil is spilt.

To their credit, BP are not sounding triumphalist and are expressing cautious optimism that the cap will hold. “We’re far from the finish line here,” BP chief operation officer Doug Suttles said. Kent Wells, a BP senior vice president, added: “I don’t want to sort of create a false sense of excitement.”

The Obama administration is not tripping over themselves either to rush to judgement.  “We’re encouraged by this development, but this isn’t over,” said Thad Allen, the US Coast Guard commander.

Still fickle as the city is, the company’s shares jumped about 8 per cent in relation to the news.

But investors maybe should take a more cautious approach:

There is still tens of millions of gallons of oil in the Gulf.  There will be tar balls and oil washing up on the beaches of Louisiana, Alabama, Mississippi and Florida for months.

Cleansing sensitive Louisiana wetlands could take several more months if not years.

Marine biologists have warned that it could be decades before the full impact of the oil, and the dispersants used to break up the slick, is fully understood.

That’s decades. And all the time people should remember the lessons of the Exxon Valdez, where a significantly smaller amount of oil was spilled but where some wildlife has not recovered.

Maybe the elephant in the room is the fisheries on which so many in the Gulf depend. How long they take to recover is anyone’s guess.

Young shrimp will be swimming in a toxic sea of oil and dispersant that is deprived of oxygen. What will be the outcome of this?

The reaction from those related to the fishing industry in the Gulf was also muted. “It’s like putting a Band-Aid on a dead man in my opinion,” said Jeff Ussury, a crabber.

“What’s to celebrate?” asked Kindra Arnesen, the wife of a shrimper from Plaquemines Parish, La., who has become a recognizable voice of outrage over the past two and a half months. “My way of life’s over, they’ve destroyed everything I know and love.”

Investors should also remember the political pressures and financial liabilities still piling up on BP.  If BP is banned from further offshore drilling in the US for seven years this would be “potentially devastating for BP” according to the Independent.

Out of total production of 4 million barrels of oil equivalent per day (boed), some 1.2 million are in the US; 440,000 from the Gulf of Mexico. And BP’s strategy includes plans for another 11 start-ups in the Gulf by 2015 and up to 160,000 boed from “new hubs” in the region by 2020.

Analysts would then argue it would make sense to sell those assets rather than have them being idle.

If BP did sell up, then maybe a legacy of Deepwater Horizon is that the company could go “beyond petroleum”, like it promised a decade ago, but failed to do.

As Philippe Cousteau, the grandson of the legendary undersea explorer, tweeted after the news of the cap was released: “Great news but the disaster is not over… now focus on restoration, education reform and getting off oil.”