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Lessons From Exxon's Valdez Spill

Despite significant differences, BP investors can still learn something from Exxon's Valdez spill.

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Watching video from the Deepwater Horizon oil spill crisis in the Gulf of Mexico quickly conjures up images of another crisis--the Exxon (now  ExxonMobil (XOM)) Valdez spill off the Alaska coast 21 years ago. Similar pictures of birds covered in oil and slicks washing up on shore might make it seem like the Valdez event would be instructive for investors pondering the outcome of the Gulf spill on  BP (BP). There certainly may be some lessons to be learned, but the significant differences between the two events make it hard to jump to any conclusions.

The largest differentiating point is that the Valdez held a finite amount of oil, meaning that the range of possible cleanup costs was much tighter than the estimates for the Gulf spill. The worst-case scenario was that all 54 million gallons of oil gushed out of the tanker. This made it possible for analysts to do back-of-the-envelope calculations on a rough initial cost to get the spill cleaned up.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.