Monday, May 3, 2010

No Plausible Explanation

The disaster unfolding since the BP oil rig explosion off the coast of Louisiana on April 20 is greater in scope than the Exxon Valdez spill in 1989. From what I heard on NPR's Morning Edition today, the cleanup could cost BP in the tens of billions, but the full cost is simply unknown at this time.

What the NPR story also revealed was that every single offshore drilling platform will be inspected for safety and soundness, making it highly unlikely that there will be any new drilling offshore for years to come.

Who's to blame? Well, certainly not the environmentalists who have longed argued against offshore drilling as too dangerous and too environmentally unsafe. Indeed, the NPR story revealed that most of these platforms do not have a simple safety valve installed which could have halted the flow of oil now pouring into the Gulf of Mexico. To me, there is no plausible explanation for not installing every conceivable device known to take into consideration the possibility that a rig could explode, collapse, or spring any kind of leak. Spokespeople for the oil industry would likely say that a full analysis of the risk was taken into consideration when the rig was designed and built, and that they'd done nothing wrong. But this is purely about economics. It probably would have cost too much to retrofit any of these platforms with the required safety mechanicals, and the downtime at the rig would have had disastrous effects on the cost of crude and gasoline, so it would have been politically unpopular as well.

I think, like Obama is doing with the banks, the government needs to demand that all major oil companies operating offshore or in other environmentally sensitive areas pay into a fund every year to bank enough money to pay for problems like this from happening in the future. To me, it's debatable whether banks are too big to fail, but the environment surely is.

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