Thoughts on BP’s Gulf Oil Spill

While Vancouver is about 4,600 kilometres removed from the oil spill in the Gulf of Mexico, it is still in our face every day. It is a headline story in all Canadian news coverage. The Exxon Valdez oil spill in Prince William Sound, Alaska was 2,000 kilometres away from the Port of Vancouver; but the spill brought lasting damage to the northwestern coastline of British Columbia. It may have been 21 years ago, but I and millions of others will never forget the images of the oil-scarred coastline and the affected wildlife in Alaska and B.C.

When I’m with others in Vancouver’s communications industry, the topic of BP’s Deep Horizon oil spill often comes up. The daily news images of tainted water in the Gulf may not be in our back yard, but they hit us hard every day. There are many PR issues in this ongoing tragedy. Here are a few:

BP apology
‘When you mess up — fess up and dress up.’ When you make a mistake, acknowledge it and tell people what you’re doing to clean up. That’s the high road to recovering your reputation, brand and business after a disaster.

BP’s CEO Tony Hayward is probably one of the most hated guys on the planet right now. Although Hayward’s one minute TV commercial apology is currently running on U.S. television, it isn’t resonating for the following reasons:

1. Honesty in question. In mid-May when Scott Pelley of 60 Minutes interviewed Mike Williams, the survivor of the oil rig explosion, he revealed there was an earlier accident on the rig that had gone unreported. The accident led to the destruction of the rig’s safety equipment. This happened just four weeks before the eventual blowout. With BP behind schedule and spending $1-million a day drilling, the loss of safety equipment was seemingly pushed aside.
2. Timing: It is late. The BP apology comes 40-plus days into an escalating disaster and several weeks after 60 Minutes exposed BP denying the oil spill was its fault in the early going.
3. Past performance. It is now widely reported that BP has the worst environmental record of all the oil companies. Anything BP or Tony Hayward says now will lack credibility and sincerity.
4. BP is not doing enough. Americans feel BP is not doing nearly enough. The oil continues to gush and the problem remains unsolved. As of June 5, a report by the Deepwater Horizon Response website states that BP has disbursed $48.1-million on 35,591 claims that have been opened. Revealed last week: the cost of CEO Tony Hayward’s TV ads is $50-million.
5. U.S. tragedy. This is the worst oil spill in US history. BP is a British company. While 30 days overdue, Tony Hayward saying that he is “deeply sorry” and “we will make this right” is good fessing up, but it is being delivered by the very British sounding and hated Tony Hayward. It probably makes an American viewer’s skin crawl.

The vast spill
With each passing day, we learn how big and how much worse BP’s Gulf oil spill actually is. CBS News reports that as much as 800,000 gallons of oil are gushing into the Gulf each day. With the 40 million gallons of oil in the Gulf of Mexico today, Toronto Star reporter David Olive has compared this to the physical size of Southern Ontario. Another eye opener comes from a CBS News stat: the 40 million gallons of oil spilled represents about the same amount of oil that Americans consume in just over one hour!

Obama’s future in jeopardy
Over the first month of the oil spill crisis, Obama was lying low and did not seem to see the enormity of the situation. He wasn’t showing strong leadership by staying ahead of the unfolding story. On May 28, the President stated publicly that he was ultimately responsible for solving this crisis. “I am the president and the buck stops here.” How the Obama administration deals with the cleanup will have a bearing on whether he’ll serve a second term. Currently the U.S. population is not with him. According to a CBS poll this week on the question, “should the Obama administration be doing more?” 63% answered yes (margin of error +/- 3%).

BP stock plummeting
On Friday, June 4, the BP share price dropped another 5%. That’s $60-billion in lost BP shareholder value since April 20 as BP’s shares have plunged.

BP’s big dividend
In spite of the crisis, BP still has a planned quarterly dividend to shareholders totalling $10.5-billion. BP worries that if it doesn’t issue the dividend, large pension funds holding the company’s stock will sell their shares leading to a market capitalization free fall and potentially be the end of the company. While this decision makes some financial sense, from a PR perspective it looks terrible. Obama’s public response to this $10-billion plus dividend summarizes public discontent surrounding the issue: “What I don’t want to hear is – when they [BP] are spending that kind of money on their shareholders, and that kind of money on TV advertising – that they are nickel-and-diming fishermen or small business here in the Gulf who are having a hard time.”

We’ll have periodic updates on the spill as the story evolves. Meanwhile, let’s hear your thoughts.