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MARINE ONE – On Friday, President Barack Obama visited the Louisiana coast to look firsthand at an oil leak disaster threatening the Gulf of Mexico. Since British Petroleum’s Deepwater Horizon rig exploded on April 20, roughly 45 million gallons of oil have escaped the broken wellhead located nearly a mile under the ocean’s surface. It has created the nation’s largest oil spill, damaging the local fishing industry and some of the world’s top nature preserves.
Obama spoke about the impact of the spill to the residents of the Gulf states. "People are watching their livelihoods wash up on the beach, parents are worried about the implications for their children's health. Every resident of this community has watched this nightmare threaten the dreams that they've worked so hard to build. And they want it made right and they want to make it right now."
Few franchisors are large enough to cause this national level of damage and attention.
London-based British Petroleum PLC (NYSE: BP), one of the largest suppliers of oil, uses a product franchise model to distribute its product to 22,600 retail gas stations. Only Royal Dutch, with 45,000 stations, China’s Sinopec, with its 29,279, and Chevron at 25,000, have more (figures are a 2007 estimate). Gas stations that have sported the BP trademark have declined in number since 2005, when there were 25,200. The company franchises a combination of a gas station and a convenience store, ampm. It estimates a franchise to require an investment of between $1.8 to $7.5 million, which includes the real estate cost for a 40,000 to 60,000 square foot plot.
Some public activist groups have called for the boycott of BP's gas stations. Public Citizen, founded in 1971 by consumer advocate Ralph Nader, has gathered a list of some 11,000 people who have pledged to not purchase BP products for three months. But analysts say the impact to the franchisor will be minimal.
BP failed to stop the leak over the long Memorial Day weekend. This morning the firm reported that another attempt, this time to use an underwater robot to cut and cap a pipe with a rubber seal, had hit a snag. The underwater robot’s diamond wire blade became stuck during the cut. BP will attempt in the afternoon to lower another blade to complete the cut. However, government and company officials are now warning that the leak may not be plugged until August.
According to Credit Suisse Group AG, BP’s cost to deal with the petroleum spill may reach $37 billion. An analyst for the company, Kim Fustier, told Bloomberg, “By early August when the relief wells are drilled, Macondo [the well] could have spilled 45 to 75 million gallons of oil into the Gulf, four to seven times Exxon Valdez.”
In 2009 BP reported an operating income of $26.4 billion and a net income of $16.58 billion.