BP Fails to Stop Petrocano Again

If there is anything more pathetic than watching a major organization fail on global TV, it is watching it happen repeatedly. Once again, British Petroleum has failed to stop the gusher of sub-sea oil coming from one of its sites on the seabed of the Gulf of Mexico. The "top kill" approach was the third major attempt to shut off the eruption from the petrocano, and it was a unsuccessful as the others. BP has come up with another "brilliant" idea, a cap not unlike the dome and the "top hat" attempts that have already failed. The conclusion is that no one knows how to fix the problem, which suggests that drilling shouldn't have happened there in the first place.

Since the deregulation of industry in the West in the 1980s, risk management has become an under-appreciated art. Part of regulation was to ensure that the private sector didn't do stupid things to its workers, its shareholders, its customers and the broader society. This did result in many economic inefficiencies, but in attempting to rid the world of this waste, governments and businesses unleashed a tidal wave of risk that they haven't managed at all well.

Businesses have one raison d'etre, maximizing profits for their owners. In pursuit of that goal, they often take on risks that are excessive (subprime securitization for example). In the case of BP, the profit from bringing up 5,000 barrels of oil at $75-90 a barrel each day bedazzled the accountants who declined to sacrifice some money to put in extra protection. The result is 11 dead along with 40 days of oil shooting into the Gulf of Mexico.

Worse, though, than having chosen not to buy the insurance is the fact that BP seems unsure of how to stop the leak. This suggests a mind set that believed nothing could go wrong and therefore nothing in the way of contingency planning was needed. Flying by the seat of one's pants is the colloquial term for BP's actions.

What is also appalling is the sudden media and political frenzy over the petrocano. The journalists who are covering the story are demanding to know why the government isn't doing something. Any suggestions about what the feds should do are welcome, but the silence is deafening. As for the Gulf State politicians, their two-faced behavior is a national shame. Until 40 days ago, they all preached smaller government, tax cuts, less spending. Now, they want subsidies, more government action, central planning for restoring their environment. One is tempted to suggest they secede, and they can indulge in their states' rights solutions. Governor Bobby Jindal (R-LA) is the most extreme example of this, but he is far from alone.

In essence, the situation is clear. BP had no business drilling where it couldn't fix a leak. The Feds had no business allowing the company to proceed without a plan to address a possible accident. The local governments are hugely to blame for turning a blind eye to oil company negligence because of the jobs and taxes BP and other provide. And the media have a share of the blame for failing to explain all of this.

The oil will continue to bubble up until the relief wells are finished in August. That means hundreds of thousands more barrels of crude will pollute the Gulf of Mexico. There is no excuse for this. And unless strict regulation is introduced and enforced, it will happen again. America doesn't need bigger or smaller government. It needs effective government to ensure that businesses manage their risks better, not just in the oil business but throughout the economy.

© Copyright 2010 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

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