BP’s “top kill” looks like it’s working to stop the flood of oil in the Gulf

posted on May 27, 2010 at 10:45 am

First good news from the Gulf of Mexico in ages. A number of news sources are reporting that the “top kill” effort to stop the flow of oil from the Deepwater Horizon well has succeeded in blocking the well.

There’s no official announcement of “success” but the federal government’s top oil-spill commander, U.S. Coast Guard Admiral Thad Allen, has told the Los Angeles Times that the pressure from the well has fallen to a very low level and that once pressure reaches zero engineers will begin pumping cement into the well to close it.

The financial effects of success, if that is what we’re seeing, are limited to a few stocks such as BP (BP) and Transocean (RIG). Ending the flow of oil won’t suddenly convince Washington to remove the moratorium on new drilling leases nor will it stop the effort to tighten regulation of offshore drilling.

Psychologically, however, success would be a huge boost to the energy sector and indeed to the whole stock market. Nothing like watching a disaster unfold with everybody involved powerless to stop it to depress the market’s animal spirits.

For example, yesterday I saw a story saying that this summer could be the worst for grasshoppers in Wyoming, Montana., Nebraska, and the Dakotas since the mid-1980s. Grasshoppers could cause billions in damage to crops and rangeland.

My reaction?

Of course. Bring on the rest of the seven plagues. What’s next a rain of frogs?

Success of the “top kill” would lift some of the pessimism in the markets created by an extraordinary run of very negative news.

Let’s hope for the sake of the people, wildlife, and environment of Louisiana and the rest of the Gulf—and maybe a little bit for the stock market.