Thursday, June 17, 2010

The Gulf Oil Spill: A Social Fiasco

Some of the best analysis I've seen on the Deepwater Horizon oil spill has taken place on The Oil Drum. One of the main bloggers is Gail the Actuary and she recently wrote a post on a subsidiary of the site called The Oil Drum: Campfire. Here's the opening section with four questions:
It seems to me with the BP Horizon Blowout, we may be hitting a turning point in belief systems, in more than one way:

• Can businesses really be expected to regulate themselves, with minimal oversight?

• Can technology solve all our problems?

• If there are technological solutions, can they be expected immediately?

• Can we really depend on the oil supply that everyone has told us is here?

Let's take a quick look at these questions in light of recent events, including the growing size of the spill. The spill is so large that everyone is having trouble figuring out the exact size. But it is clearly far larger than the first estimates made to the public. It appears the larger estimates are not that far off from what BP said in its own internal estimates within the first few days of the accident. BP also had a range of the possible size and the high end of that range was around 2.5 million gallons a day. Surprise. All we can say for sure is that this is the largest oil spill in our nation's history and is now one of the largest in recorded history—and it is still growing. Tens of millions of gallons have poured into the gulf because BP decided to take shortcuts and had no backup plan if things went wrong.

Now Gail the Actuary asks: 1. Can businesses really be expected to regulate themselves, with minimal oversight?

I'm not being cynical when I write that this is the wrong question. The right question in the year 2010 is simply this: can large corporations be trusted, period?

When 10,000 people in Bhopal, India died back in the 1980s because of a chemical accident/blunder at a Union Carbide plant in India, the chairman of Union Carbide accepted full responsibility—for about a week. It took the chairman that long to learn what it meant to accept responsibility and to receive dozens of calls from angry major stockholders who were themselves unwilling to accept responsibility for what had happened. The chairman went into public relations mode mixed with a large dose of stonewalling.

In some respects, Congress should also include major stockholders in their hearings. Of course, some major stockholders include pension funds, retirees and foundations. Responsibility has a way of being deferred rather effectively down the road with the help of an army of lawyers and public relations flacks.

Tony Hayward, the chief executive of BP, has perhaps taken the procedure a step further as we see in this Houston Chronicle article:
In response to question after question, Hayward calmly insisted that he did not know what motivated key decisions about the blown-out well's design, frustrating House members who complained that his answers were evasive and overly legalistic - as if drafted by lawyers mindful of the flood of negligence lawsuits facing the company.

Tensions spilled over less than 20 minutes into the hearing.

"You're not taking responsibility," said Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee. "You're kicking the can down the road and acting as if you had nothing to do with these decisions."

"I'm not stonewalling," Hayward responded, over the clicking of cameras documenting his inaugural Capitol Hill testimony. "I simply was not involved in the decision-making process."

I can guarantee that every executive in America is taking notes. It doesn't matter one bit that BP is a British corporation. Most corporations around the world are in the same racket: maximizing profits, socializing losses and denying responsibility.

Without getting into a long history, the answer to the question is this: no, corporations cannot be trusted unless they are regulated, held to a high standard and clearly see that cheaters and lawbreakers are punished no matter how many lawyers they have.

2. Can technology solve all our problems? This is a sad question, particularly given the optimism around 1960 or so. In real time, given the real conditions of the world, the answer is a pathetic and resounding no. Most technology problems are usually social problems. This means that if a technological solution exists, it is only temporary because the social problems begin to intrude again. The green revolution, for example, increased world food supplies but it also led to a large increase in the number of humans in the world and meant diminished resources per person in the world.

The more pertinent question, perhaps, is this: can science solve all our problems? Maybe, but only in conjunction with a profound understanding of human nature that we are far short of achieving to this date. In fact, what we have achieved so far leaves far too much out of the "equation," though if we survive this century, we may develop tools that begin to give us some of the insights that we need. But the vision of science will have to grow much larger than it is now. What we need is a bit more wisdom and science does not have an abundance of that.

But back to the question. We are running out of cheap oil and it is beginning to have a major impact on the world. There are solutions, and maybe eventually there will be cheap solutions, but there are no cheap, quick technological solutions and it would be a disaster to continue with business as usual. We are either heading for major change that will allow a large majority of humans to survive, or we are heading for a disaster too large to imagine if we continue on our present course, as if we have no choice or better visions. Alternatives exist, but we are running out of time if we think leaving things to companies like Exxon, Enron, Halliburton and BP is somehow a viable option.

3. If there are technological solutions, can they be expected immediately?

Not give today's business standards and the Republican laissez faire deregulatory philosophy that has existed since Reagan took office. We are destroying our resilience and reserves for the sake of a few extra bucks. If there is an emergency, we have no backups. This is a national security issue where right wing Republicans have dramatically failed. Right wing Republicans are the kind of people who cut a fire fighting budget by $50,000 and then are nowhere to be found when there is a $500 million fire. We allow too much of our critical military equipment, our infrastructure, our technology and our business tools to be made outside the United States. We allow insurance companies to sell policies without the cash to pay off those policies. We allow banks to operate who do not have the resources to handle bizarre financial instruments when those instruments collapse. We do not have the equivalent of a fire house and equipment when a truly major oil spill occurs. We have taken our comfortable way of life so utterly for granted that we do not realize the danger we have put ourselves in.

4. Can we really depend on the oil supply that everyone has told us is available?

The answer is no. It's been no since the 1970s. It has always been no. It will remain no. It will become increasingly obvious that the answer is no. When we start burning a lot more coal in the cities, we will be reminded why we turned to oil and natural gas in the first place. Question four is stupid. It requires a large number of ignorant people to even exist. And they do exist. Oil companies are heavily dependent on the ignorance of a majority of Americans. If a large enough majority of Americans truly understood what we're facing, there would be change. There should have been change 30 years ago.

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Anonymous S.W. Anderson said...

Excellent points and observations throughout. I don't disagree with any of them.

I'm sure Gail Actuary wanted to generate discussion with those questions and expect she succeeded. But on their face, the four questions triggered an admittedly snarky reaction from me: "If you have to ask that, I have to wonder if you'd comprehend the answer."

The answer to the first question, especially, is so painfully clear right now that even some erstwhile conservative laissez-faire fanatics seem to get it, albeit some of them only with resentful resignation.

Your response to question 3 is especially insightful. We're squandering the seed corn for future national prosperity so a merry band of fat cats can grow their wealth in the short term to excesses well beyond the plateau labeled "obscene." It's not just about throwing out machines, tools and plants. It's about forfeiting knowhow and practiced skills.

The bright young guy who's just not academically inclined could, if necessary, be rescued from his make-do job delivering pizzas or working on a lawn crew to learn how to make dies or operate and maintain an industrial lathe, but not overnight. And that's only if there are still old hands around to train him. If anyone anywhere is particularly concerned about this, I haven't heard about it. Big mistake.

7:03 PM  

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