Who Will Feel The Most Pain From The EPA's Suspension Of New BP Contracts?

The federal government is suspending BP from new contracts. Today's decision by the EPA is the latest consequence to come from the 2010 gulf oil spill.

BP won't be able to enter into new contracts with the federal government. But the suspension doesn't affect contracts already in effect. Andy Lipow is an energy consultant in Houston. He says it's hard to predict how much the suspension will cost BP, but there is a recent example to use as a guide.

"Just in September, the Department of Defense awarded BP nearly $1.4 billion in jet fuel contracts.  What I expect to happen is when those (contracts) expire in late 2013, some other supplier will fill the void, and BP will have to sell its jet fuel into another jet fuel market."

Lipow says there are about two dozen other suppliers who could easily take BP's place in supplying jet fuel.  And, since the contracts are for the Department of Defense, Lipow says BP's suspension will likely have no impact on commercial airline ticket prices. But it is affecting BP's share price.

"The shareholders feel some pain, which would provide pressure on BP's management to comply with federal, state, and local regulations."

The suspension comes just two weeks after BP agreed to plead guilty to criminal charges related to the Deepwater Horizon disaster. That includes paying $4.5 billion in damages. The EPA says the suspension will remain in effect until BP can provide evidence that it meets federal business standards.

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David Pitman

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