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Professor Aseem Prakash commented in journal articles related to British Petroleum oil spill accident

Submitted by Toni Kwong on June 22, 2022 - 11:44am

2010 Deepwater Horizon accident did not harm BP’s long-term stock market returns

After the deadly 2010 Deepwater Horizon explosion resulting in the largest marine oil spill in the United States history, a new analysis suggests that its stock market returns were not significantly affected in the mid to long-term. Industrial accidents like Deepwater Horizon can cause reputation and financial damages for British Petroleum (BP), the company that leases an offshore drilling rig called Deepwater Horizon in the Gulf of Mexico. Nevertheless, the extent of the impact of Deepwater was unclear. A study conducted by University of Washington Professors used a "synthetic control analysis" where it compares BP's actual reputation and stock performances to the "synthetic brand's performance", which shows how BP might have fared had the accident not occurred. The finding shows that although BP's stock price plummeted immediately after the accident, long-term stock market returns did not decline significantly compared to the hypothetical returns of the synthetic brand. 

“In the aftermath of the Deepwater accident, BP’s reputation showed a serious and persistent decline. Yet, in terms of financial market returns, though the stock price dropped drastically in the first two months following the spill, no statistically significant decline in the stock market returns was found either in the mid-term (1-2 years) or the long-term (2-7 years).”

Deadly oil accident in 2010 didn’t affect BP’s stock market returns

“Can we depend on the stock market to discipline first? The answer is no,” Aseem Prakash, study author and UW researcher, told ZME Science. “Fossil fuels are not going away any day now but we can demand higher safety standards, for example preventing methane leakage. “It’s the most profitable sector, outperforming everybody else.”

Deepwater Horizon oil spill did no harm to BP's long-term share value

"We thought after this huge spill there ought to be a long-lasting injury on the inventory value," says Prakash. There wasn't. 

"There's a market failure right here. We want extra regulation so these disasters don't happen sooner or later."