Happy eight-month anniversary, worst oil spill ever!
It seems much longer than eight months since the worst oil accident in history struck the Gulf of Mexico. Certainly BP wishes it was a lot further behind it, given that it is still working to raise $30 billion that it owes the U.S. government for a victims compensation fund and additional expected bills, with ...
It seems much longer than eight months since the worst oil accident in history struck the Gulf of Mexico. Certainly BP wishes it was a lot further behind it, given that it is still working to raise $30 billion that it owes the U.S. government for a victims compensation fund and additional expected bills, with the potential for tens of billions more in penalties for the worst self-inflicted corporate disaster in recent memory (we can debate comparisons in the comments section below). The spill made a fall guy of Tony Hayward, ending his short career as CEO at the age of 53 and making him the second-straight BP chief executive after John Browne to collapse in a scandal (Beware, current BP CEO Bob Dudley: disasters can come in threes).
Yet eight months later, there has been almost no major fallout from the disaster for the oil industry, apart from a tighter production regime in the Gulf of Mexico: BP and everyone else continue to do business around the world, including in offshore zones. Which signals either a perception that BP handled the spill much better than the conventional wisdom suggests, or that Americans and the rest of the world are more inured to environmental disruption than they used to be. Most probably, it’s the latter. But should that be the case? We discuss that question below.
Over at the New York Times, David Barstow, David Rohde and Stephanie Saul reported this week that once the blowout happened, every possible thing that could go wrong did. As far as the blowout itself is concerned, their read is similar to the interim conclusion that a bipartisan government panel reached in November; that BP reported in September; and that, in the earliest such finding, the Wall Street Journal‘s Doug Blackmon and team found in their gold-standard reporting last May: Nothing went right, and everything went awry.
On account of all this, a lot of people have had fun at Hayward’s expense. At O&G, we think it’s kicking a man when he’s down (and kicking, and kicking). Here is Sydney Finkelstein, a professor of management at Dartmouth, naming Hayward’s blunders the worst of any CEO not only in 2010, but in the last decade:
The takeaway is validation anew of Nassim Taleb’s black swan theory, which suggests dispensing with our most hallowed predictive models because they fail to take into account the minuscule potential for things to turn out much, much differently from what seems likely. In a nutshell, the black swan message is: Beware of big shots suggesting either that something definitely is going to happen, or could never happen, because they have the whole thing figured out.
In the case of the Gulf of Mexico, oil industry officials insisted for years — and interestingly continue to do so in a stampede to resume the status quo-ante — that they had accounted for all possible crises, and that federal authorities therefore should get out of the way and leave oil drilling to the experts. Once the April 20 accident pricked that balloon, politicians positioning themselves to run for president in 2012 piled on with new categorical assertions. Among the loudest was the youthful Louisiana Gov. Bobby Jindal, who pestered BP to spend $360 million to build huge sand berms to protect his state’s wetlands, and since then, while on a book tour, has savaged Obama for his spill response. But, as the Wall Street Journal’s Stephen Power reported, a presidential panel found that the berms diverted the attention of responders, and in the end absorbed little of the spill. Here is Jindal:
At the Financial Times, Sheila McNulty describes the current situation: “Regulators have issued only 19 permits to drill new wells in the shallow waters and one in the deep water since BP’s April 20 disaster. Before the accident, 69 exploration and development plans were pending approval, and 10-15 permits a month were being issued. … There were 86 rigs in the Gulf before the spill, but 14 have left since.”
This lack of drilling activity has infuriated many people in addition to Bobby Jindal. John Hofmeister, the former president of Shell USA, has no such political ax to grind, but is conveying a similar message – the drilling embargo, Hofmeister says, is “election politics writ large,” meaning an attempt to boost Obama’s chances of holding his Democratic base in 2012. Over at the FuelFix, William O’Keefe says Obama “sweeping self-embargo [is] unwarranted.”
But is that accurate? The bipartisan presidential commission on the spill seems to think otherwise, wrote Politico‘s Darren Goode. The Democratic chairman of the commission, Sen. Bob Graham of Florida, dismisses the assertion of moratorium critics that the spill was an aberration resulting from the errors of a single group of companies. In their inquiry, Graham said, commission members figured out “not to lay blame on just a few rogue companies.” His Republican counterpart, William Reilly, who ran the Environmental Protection Agency under then-President George H.W. Bush, said that companies as a whole operating in the Gulf of Mexico suffered from a “widespread lack of serious preparation, of planning, of management.” They “had no effective containment preparations and laughable response plans,” Reilly said.
Given the spill, one wonders why anyone would feel assured by fresh categorical assertions of drilling safety. Then again, we are hearing similar noise from Wall Street titans regarding the absolute necessity of slowing down financial regulations put in place after the 2008 global conflagration that Wall Street bankers set in motion, writes the Center for Public Integrity’s Julie Vorman.
Which is one reason The Black Swan continues to have resonance.
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