It got going last week — talk of a boycott of BP, as a way to protest its oil spill and its approach to oil drilling. A small organized boycott is underway, but I don’t expect it to turn into anything big. Even if it can be established that BP knew the risks it was taking, by drilling a well without first having the technology to operate it, it’s hard to look at the rest of the oil industry and convince yourself that they are doing better. It is impossible to boycott the entire oil industry, but people will be moved to cut back, at least in a small way. At the very least, people who were thinking of driving to the beach may be persuaded to stay closer to home if they are worried that the beach may be closed by an oil slick by the time they arrive.
Limits on liability ensure that BP will not be liquidated to pay for the restoration efforts, but even so, the oil spill is more than a serious problem for BP. Even if the well could be successfully capped this weekend, the oil will continue to wash up on beaches for the rest of the year, and the cleanup effort will continue for several years. All this means that BP is ruined as a company. Its name will forever be associated with tar balls and the frightening smell of decaying heavy crude. This will put it at a permanent disadvantage compared to most of its competitors. Even before the oil spill there were obvious problems with BP’s management of its oil business. All this points to a situation where it will be more profitable to sell off the assets than to continue to operate the company.
So it’s probably not, in the end, a question of how BP can carry on, but of how it can best break itself up and sell off the pieces, making sure for the sake of the stockholders that BP’s tarnished identity doesn’t stick to any of the pieces that remain.