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Will Obama Go Nuclear on BP Tonight?

President Barack Obama
Photo by: Pete Souza
President Barack Obama

Is Obama going to launch the nuclear option against BP in tonight’s Oval Office speech?

That option would terminate all BP oil and gas leases and suspend all federal contracts with the oil company.

BP is the Defense Department’s biggest oil supplier, with a contract worth more than $2 billion yearly, according to energy analyst John Kilduff. Such a move by the president could conceivably bankrupt BP .

One wonders, by the way, why the Defense Department has never applied the Iran sanctions law against BP, given numerous press reports that the energy company continues to trade with the enemy Iran. In fact, BP has partnered with Iran in at least two oil fields and a pipeline outside of Iran.

But back to the nuclear option: It is possible that debarring BP is going to be an Obama threat, as the administration seeks to push BP to create a $20 billion oil-cleanup escrow fund run by the government. That looks suspiciously like a nationalization move. Remember Citigroup.

The other oil sharks are already swimming in the waters around BP. It has been reported that the beleaguered oil company has sought the services of several Wall Street banking firms for a takeover defense against ExxonMobil , Royal Dutch Shell , and Chevron .

Of course, the suspension of, or moratorium on, offshore drilling will continue to damage BP’s bottom line and cash flow, along with the bottom lines of other big drilling companies. Many of these big drillers are already looking to move their operations to China, Africa, and elsewhere.

The Gulf area supplies nearly 30 percent of U.S. oil, and suspension of drilling seems already to be putting upward pressure on oil prices. Oil is up $2 today to $77 — nearly $10 higher than its low in recent months. Retail gas prices are creeping up, too, which could set the stage for a somewhat slower economic-recovery rate. So will rising unemployment in the Gulf region, along with lost tourist dollars.

In today’s congressional hearings, ExxonMobil and other big oil companies blasted BP for human malfeasance. And now there is talk that Obama wants the U.S. military to take over the whole cleanup operation.

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Meanwhile, the president is expected to make a clarion call tonight for cap-and-trade — a huge energy tax on the economy that could sink recovery hopes.

Cap-and-tax will never play around the country, but it will mobilize tea-party candidates to overturn Obama supporters in the midterm elections.

Despite repeated trips to the Gulf to create the aura that he is “doing something” about the BP catastrophe, the president is digging himself into a deeper political hole. Nationalizing BP, taxing oil and gas companies, and promoting unpopular cap-and-trade policies all give the appearance that Obama is flailing about.

It’s not a good appearance.