BP says the falling oil price means it should pay a smaller fine for the Deepwater Horizon leak
Despite the risk it poses to energy profits and jobs, the falling oil price may bring good news of sorts to BP.
The company will attempt to convince an American court that falling revenues mean that fines relating to the Deepwater Horizon spill in 2010 should be lower than previously expected.
The oil price is currently sitting 40 per cent below where it was at the time of the disaster, in which an estimated 3.2 million barrels of oil spilt into the Gulf of Mexico.
Legal action is underway to determine BP's punishment. As a court prepares to considers how much the company should pay for each barrel released, BP's lawyers say the fine should be set at the lower end of the range.
"The government is seeking a $4,300 fine for each one," the Wall Street Journal reports. "BP contends that fines should be capped at $3,000 per barrel."
A fine at the upper end of the range would amount to a fine of $13.76 billion. At the lower end it would be $9.6 billion.
Written arguments have already been submitted, and the hearing will begin on Tuesday in a federal court in New Orleans.
"Even if the fine is capped at BP's request," The Independent reports, "it would be by far the largest settlement in the history of the Clean Water Act. The current record is the $1bn paid by Transocean Ltd. in 2013 for its part in the same oil spill.
Fitch Ratings said last week that the falling oil price has left the company less able to cope with a penalty of that scale, and other analysts "have been speculating that a slimmed-down BP could become a takeover target once the Deepwater Horizon litigation concludes," says the Wall Street Journal.
Oil price drop is 'giant tax cut for UK economy'
The dramatic fall in the oil price will spur the UK economy to grow faster than had been predicted this year, according to influential forecaster the EY ITEM Club.
The Chancellor had expected 2.4 per cent growth – but ITEM says 2.9 per cent is possible. That is also a 0.5 per cent upgrade on the Club's last prediction, made in October.
The revision was made because falling oil prices are expected to boost consumer spending, reports Sky News.
Reacting to the news, Danny Alexander, Lib Dem chief secretary to the Treasury, said: "Falling oil prices act like a giant tax cut to the UK economy and will further boost our already established recovery."
The price of Brent crude has fallen by more than 50 per cent since last June. The Club's chief economic adviser, Peter Spencer, said: "Not every economy will be a winner from oil prices collapsing, but the UK certainly is.
"While it is not a game changer in terms of growth prospects, falling oil prices come just as the recovery was losing momentum and will move the game up to a higher level for a year or two."
The ITEM club also predicts that inflation will stay at around zero in 2015 – with a little deflation in the early months of the year. That should in turn mean the Bank of England will keep interest rates lower for longer.
ITEM predicts that rates will not rise from their current record low of 0.5 per cent until early in 2016, after which it predicts the Bank will raise the rate by 0.25 per cent every three months.
Oil giant BP will to announce job cuts at the company's North Sea operation today in the latest sign that the falling oil price is hitting the British petroleum industry.
The company is expected to brief employees in Aberdeen today about the swathe of job losses. BP employs 4,000 people in the North Sea and 11,000 more around the UK.
BP announced that it would undertake restructuring in December last year following the collapse of oil prices due to low demand in conjunction with the growing oil glut. The price of oil has fallen in the space of a year from a peak of around $115 last summer to less then $47 this week.
Businessman Sir Ian Wood said that up to 15,000 jobs could be lost in the North Sea as a result of falling prices.
Shell cut 250 North Sea jobs last August, and Chevron cut 225 in July. Earlier this week, the Daily Telegraph revealed that Tullow Oil would also be announcing job cuts by the end of the first quarter.
Many companies, including Chevron and Wood Group have frozen salaries for employees and cut contractors' pay.
BP has also accelerated plans to cut back-office jobs around the world, including many in the UK and the US. The company has been downsizing since its catastrophic oil spill in the Gulf of Mexico in 2010, but BP executives say that tumbling global oil price is speeding the process.
Bank of England governor Mark Carney said that the falling oil price has come as a "negative shock" to the Scottish economy, which relies heavily on North Sea reserves. But he insisted that overall the falling oil price was good for the UK economy, and had been instrumental in the current ultra-low inflation which could help to boost consumer spending, the BBC reports.
But Edinburgh-based energy analysts Wood Mackenzie said that the long-term impact of the low oil price could be problematic for the fossil fuel industry.
If Brent crude falls to $40 a barrel, oil companies will start shutting down production wells, the group told Scottish Energy News.
UK energy secretary Ed Davey will travel to Aberdeen today to discuss the situation with oil and gas executives.
Oil price: Brent crude tumbles as Goldman Sachs cuts forecast
The oil price fell again today as global investment firm Goldman Sachs became the latest group to predict that prices will stay low in 2015 and 2016.
It now says that Brent crude, the global benchmark, will average just $50 per barrel in 2015 and $70 per barrel in 2016. The company had previously forecast prices of $83 and $90 respectively.
Opec is likely to keep the oil price down in a bid to tackle the growing US shale industry, Goldman Sachs said.
"To curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer," its report advised. The search for a new equilibrium in oil markets continues."
The price of Brent crude fell by two per cent this morning, to $48.80 per barrel, its lowest point since May 2009.
The drop in oil price had an immediate effect on the rouble. It fell by 2.5 per cent this morning to 62.8 roubles to the US dollar, The Guardian reports.
Prominent Saudi businessman Prince Alwaleed bin Talal says the oil price will continue to fall unless producers act by cutting the supply.
"If supply stays where it is, and demand remains weak, you better believe it is going to go down more," he told USA Today. "But if some supply is taken off the market, and there's some growth in demand, prices may go up. But I'm sure we're never going to see $100 anymore."
However, the prince dismissed suggestions that Saudi Arabia and the US were artificially lowering prices to hurt Russia as "baloney and rubbish":
"I'm telling you, there's no way Saudis will do this. Because Saudi Arabia is hurting as much as Russia, period. Now, we don't show it because of our big reserves. But I'll tell you, Saudi Arabia and Russia are in bed together here. And both are being hurt simultaneously."
UK motorists, on the other hand, have reason to celebrate the falling oil price. A garage in Birmingham has become the first in the UK to lower the price of petrol to below the £1 mark.
Harvest Energy forecourt in Kings Heath reduced the price of unleaded to 99.7p a litre yesterday afternoon, the Birmingham Mail reports.