BP oil spill worse than Exxon Valdez, could cost co. $12 billion

"We will clean it up," the company said.

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Though it is impossible to know just how much of a hit BP will really take for clean-up costs and legal liabilities, various estimates for how much it could cost to clean up the spill range from $3 billion to more than $12 billion.

BP, which said that it is spending $6 million to $7 million per day to shut off the flow and limit damage, also could take a hit to future earnings if it needs to slow other exploration and drilling in the Gulf of Mexico, where it has substantial acreage rights, analysts said.

BP is also expected to reimburse the U.S. federal and local governments for work they put into stopping the spill.

Accordng to Pavel Molchanov, analyst with Raymond James, in the Exxon Valdez incident (1989), 10.8 million gallons of oil spilled before the leak could be plugged. But the Deepwater Horizon spill could potentially eclipse Exxon Valdez in terms of oil spilled. And, if Exxon paid more than $3.8 billion in cleanup and damage costs, plus about $500 million in punitive damages, "We know that the price tag is going to be higher today, everything else being equal," Molchanov said.

And, though BP is "more than capable of covering all of the expenses that they'll be liable for," Molchanov said its reputation would take a hit.

Agrees Andrew Lipow of Lipow Oil Associates LLC consultants in Houston. "In the damage to their reputation ... [the cost] is quite substantial. It's just another in a series of events that have associated fatalities with the BP name since 2005," Lipow said. In 2005, an explosion at BP's Texas City Refinery claimed 15 lives.

However, it's not just BP and its partners and service providers that will be reeling from the aftereffects of the oil spill. "This will be a financial calamity for many firms. Their liabilities are immense and must not be underestimated," wrote David Kotok, chairman and chief investment officer Cumberland Advisors, a Sarasota, Fla.-based investment firm, in a report last week. The firm does not own shares of BP.

According to market watchers, the oil spill also highlights the gross disregard of safety issues by energy giants and could put a stop to growing momentum for more offshore drilling.

Meanwhile U.S. President Barack Obama vowed that his government would do everything within its power to mitigate the economic damages from Gulf oil disaster.

Speaking before the Business Council, Monday, Obama said, "We are committed to preventing as much of the economic damage as possible by working to contain the impact of this potentially devastating spill."

The US president, who blamed BP for the Gulf oil spill that is threatening to become the largest environmental disaster in the country's history, surpassing that of the iconic Exxon Valdez oil spill in Alaska in 1989, added that his government will "continue to explore every possible option to create jobs and support local economies in the Gulf."

The White House also said that senior Obama administration officials want information about how BP plans to "ensure an effective response" in all potentially affected states, including Louisiana, Mississippi, Alabama and Florida.

The U.S. Senate is also mulling passing a measure to raise the liability limit for the spill from $75 million to $10 billion. Sen. Robert Menendez of New Jersey, who is co-sponsoring the measure, is confident that it could apply retroactively.

On Tuesday, shares of BP closed 2.95 percent down at £558.50 on the London Stock Exchange.