Reading more about the spill over the weekend.. the situation looks much worse than it did on friday. The visible surface area of the spill has grown much faster over the last few days than it should have if it were leaking at the rate of 5k barrels a day. The fear is that the piping will totally open up and release on the order of 165 – 250k barrels a day making it a bigger spill than the Valdez in as little as a couple days. Worse.. there is a pretty good chance at this point that the oil is going to migrate east and get caught up in the [gulf stream] which will carry it around to the east coast of Florida and potentially as far as NC affecting roughly half the east coast. One can just imagine the broad impact to the economy from fishing to tourism to real estate along all that coast line as we move into the summer tourist season. Many businesses in coastal areas depend on busy summers to survive.. even in the best of times. Somehow I don’t think people will be going on eco-vacations to clean oil off their favorite beaches.
It sounds like we are just not equipped to deal with this sort of leak at this depth of water. We also don’t know how much oil might be hidden under the surface. So far they have been unable to close the main valve that rests on the sea floor.. no one is sure why it won’t close. The next plan is to try to drop a 40′ high dome over the well head which will capture the leak and pipe the leaking oil up a large hose to be collected at the surface. This plan is based on the 5k barrels per day figure… if the well has totally opened up though it’s hard to see how this approach would work. The dome plan is set to be attempted around next weekend and we should have a better idea by then what the rate of the leak might be.
From a trading standpoint the tanker companies might get a little bump depending on the severity of the leak and how they get it under control. Since the Jones Act only allows US owned and flagged ships to transport oil from the gulf to US ports I’ll be looking at OSG when they report on Tuesday to see if they mention anything related to the spill during their conference call. I don’t know who else is a big operator of these routes or how else this might be traded.