No end in sight to the Gulf Coast oil spill
It’s been hard to miss the negative news coming from the Gulf of Mexico. The gulf spill has taken a very serious turn with news that the leak is not possible to fix until relief wells are drilled. The whole process could take until August. Already the fallout has begun, and it is aimed squarely at Barack Obama. This is happening through the American phenomenon whereby a president’s political enemies smear him with any ammunition they can find, no matter how farfetched the connection is.
Blaming the President
There has been a misplaced attempt to blame Obama for the present crisis. Let me be clear, this should lie entirely at the hands of BP and their subsidiaries. BP made the mistake. BP was drilling the oil (via TransOcean). BP was making the investment. They should be liable for the damages. The modern media often brings an atmosphere of hysteria to our political debate. If something goes wrong, immediately find someone to blame. Shoot first, ask questions later. All too often, the President is the first scapegoat. Now there are sensational articles that this is “Obama’s Katrina!!” and the like, and the idea will take hold far more than it should. Wasn’t another President named George W. Bush known as a friend of the oil industry? The same thing happened when the terrorist almost got away a month ago, when the Nigerian almost lit his pants on fire last Christmas, and so on. There are enough legitimate issues with Obama’s economic strategy to focus on without resorting to these ill-conceived attacks. BP already has extremely strong incentives to close this leak. Every barrel of oil that shoots out into the gulf is a barrel of oil that BP can’t sell to a paying customer. What is Obama going to do that can possibly make them want to close this faster than they already would have?
BP is the real culprit
We need this Gulf oil, and as much of it as we can get. Oil companies certainly downplayed the risks involved. The regulators on the scene are in tight with the oil boys. There were some lapses in supervision. That being said, unless we want to completely ban offshore drilling in the gulf, there will be accidents like this (perhaps a separate debate should be – “Is it worth it?”). The operations involved to drill a mile underwater are too challenging to perform without errors. Equipment that is supposed to work can break. People are not perfect, they make bad decisions, and in an ideal world they should pay the consequences. This leads me to the real concern of this sequence – what happens to BP?
BP should be liable for the entire economic damage of this spill. If it is not possible, they should be fined at least a few billion dollars. Surely there will be calls that this is economically calamitous, unsound practice, anti-corporate, anti-business, and so on. This ignores the fact that thousands of businesses can no longer operate due to BP’s negligence. They have singlehandedly destroyed a $2 billion/year Gulf Coast fishing industry. They have severely hampered gulf coast tourism. And to top it off, we STILL don’t know the extent of the damage that will ultimately arise out of this. What if the relief wells are only partially effective? They’re certainly not supposed to be, but has anything else to come out of BP been accurate information? What if tar balls are washing up on the shores of Miami Beach in three months? That certainly would not help Florida’s economy much.
Unfortunately, BP will almost certainly get off lightly. Fines will be levied, and the numbers will sound huge to the average Joe, but the real impact to BP’s operations will be minimal. In the long run this will not touch them. Another issue is that the government will probably get their piece first, and the productive business owners actually harmed by the spill will get the crumbs (I’m willing to revisit this prediction in several months/years). Ideally, the legal system would allow affected parties to sue BP, but certainly a compromise will be forced upon those people whose livelihoods have been ruined. BP are simply too well connected and too integral to the oil business to be crushed like this. You can be sure to see a lot of Obama press conferences this summer where he takes an angry tone and promises a crackdown on big oil. I predict the “crackdown” will be short-term and half-hearted.