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Is BP susceptible to a fall in the price of oil?

As the BP oil crisis continues, with more oil gushing from the Gulf of Mexico well, there are growing concerns about the potential liabilities this may create for the company going forward. The cumulative drop in the share price equates to a loss in value for BP of around USD100 million with the potential liability as yet uncapped. So what are the short-term liabilities for BP?

In the short-term experts predict that current cash reserves of USD15 billion will be enough to cover the cleanup operation and associated costs and the company will also have sufficient funding to start trickling funds into the US government's USD20 billion escrow account. However, there are now growing concerns that the company could be at the beck and call of a potential fall in the oil price which would have a dramatic impact on cash flow and profitability.

There is no doubt that this is potentially one of the worst ever oil disasters in the world and the very fact that the well has yet to be plugged has seen BP's liabilities continue to rise on a daily basis. There is potential talk of a criminal case against the company and key personnel, by the US authorities, although this may well be many years down the line.

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