The Day of the Black Sea

You got to hand it to Chris Graythen of Getty — he sure can make an oil spill look beautiful. Actually, there are a lot of great photos being taken in the Gulf of Mexico right now. See here, here, here and here. I am not being callous, but you simply can’t turn your eyes away from these photos.

(Following is an opinion piece. Skip it if you are sensitive).

So this morning, U.S. Attorney General’s office opened a criminal case towards BP. I know BP is primarily responsible for the oil spill, but the case was nothing but making cheap political capital out of this tragedy. Yes, the case will be hideously popular, obscenely popular with the voters in the U.S. (say what you may about the administration in Washington, you can’t deny it is very shrewd, and its eyes were fully set on November elections).

Fingerpointing is all the rage in Washington it seems. In singling out BP with this criminal case, the administration blithely ignored the responsibilities and negligences on part of TransOcean, Halliburton, the White Houses (past and present), government agencies, local and state governments and the Congress. Eventually, the blame lies squarely on our doorsteps — our insatiable addiction to oil caused this crisis. Full Stop.

Knowing this, it is impossible to take a moral high ground; actually, despite this accident, the oil extraction is relatively less risky compared to other big scale enterprises like construction, Wall Street or NASA. There are always capsizing and pipeline bursts here and there, but the last time spills of this scale happened were in 1979 and 1990. Considering the number of wells around the world and how difficult it is to get oil, this can be considered a good track record. Since risks associated with such a drilling were calculated and regulated beforehand, it is also disingenuous to apply a law retroactively to make a business more liable (BP should be recommended here for taking full responsibility).

So where do we go from here? Well, we don’t go anywhere, but if you have enough money and are willing to take a risk, it is time to short BP. BP now risks being a target of a takeover (or at least a receivership) from the U.S. government. Taking the world’s third largest company out of private sector will have severe negative impact on a fragile economy. Only by shorting BP, pension and mutual funds will recover their investments. So buy BP shares, arrange some default swaps, and bet on them to fail. For a safer measure, bet on FTSE and Dow Jones to go down too. If you aren’t doing it, a lot of hedge funders are doing it anyway (BP lost $12 billion this morning alone).

24 thoughts on “The Day of the Black Sea

  1. I know you warned us it was an opinion piece, but I’m just letting you know I’m unsubscribing. It is possible that BP was negligent, which could allow criminal charges and penalties, but you prejudge them because of a distaste for government. Moreover, your reasoning skills are not that strong, especially given the lack of regulation in oil drilling historically (See MMS in Department of Interior). You assume regulation was right, when I would argue that regulations have been gutted by most conservatives in the name of profits and the free market, but leads to a disaster.

    Personally, when drilling 5000 ft (almost a mile) under water, the risk seemed to be much higher than BP cared to admit. And if the cost of this to life and the economy is what it could be, we maybe should rethink offshore drilling and look into other sources. Also, in 100 years, we are likely to be out of coal and oil. Domestic oil hasn’t grown in a while. No new fields have been found. The 1979 incident was only a few hundred feet and they couldn’t plug that one either. A shift away from frossil fuels may be prudent.

    What law is being retroactive? Under Clean Water Act BP is possibly liable for a few thousand dollar fine for every barrel. That has nothing to do with the liability cap. Why not see what comes about? Is it possible BP was negligent or do you throw away that possibility?

    The knee jerk conservatism is fine when commenting on the UK, but when a British Company, which made a ton of money after the US toppled Iran for them, screws up our waters, I’m allowed to get a little mad. And if they were negligent, (e.g. not using proper materials, using shoddy blow out prevent, etc.) I’d like those to be held responsible. The same way other types of criminals may.

    I expect this to get deleted. But I said my piece. Good bye

  2. I also disagree pretty strongly, but am not unsubscribing. I love the blog and am not offended by your opinion 🙂

    I really do think you’re off-base, though. A “government takeover” of BP? That’s some pretty serious fearmongering!

  3. Thank you for such a wonderful blog. You do a great job of keeping politics out of it, and I will continue to subscribe. It is forgivable that you inject the occasional political commentary. That being said, please forgive me for this harsh, but well intentioned, critique.

    It is certainly not “impossible” (as you write) to take a position of moral critique on BP’s spill. Through what is most likely negligence, BP has destroyed what cannot be “compensated” in dollars. The fragile coast of Louisiana is a haven of endangered species and beautiful IRREPLACEABLE wildlife that cannot be compensated for by mere judicial damages award. This destruction is BOTH (1) BP’s moral wrong to be so careless when so much was at stake, and (2) our own wrong for voting in politicians (Bush administration) willing to remove the last few safeguards (regulations requiring remote shutoff switches and other precautions) that may have saved the coast. The obvious lesson from this oil spill is that where simple, inexpensive PRUDENT safeguards have the best chance at preventing a CATASTROPHIC oil spill, then those safeguards should be regulated into the system if they would not be implemented otherwise. The difficult balance is how much cost do we want to burden industry with regulation, and what are the risk/reward trade-offs. But there is a new strain in U.S. politics that is so ideologically anti-regulation and pro-oil company (just today BP hired Cheney’s PR person), that they would never seriously evaluate those trade-offs because they are reflexively anti-regulation. Blame rests especially with that Bush administration, much more so than the current administration that has to deal with the real-world consequences of the last (in more than just the oil spill).

    What really upset me (as a recent resident of New Orleans who lost the home I was renting to the hurricane, and as an environmental attorney with experience in Plaquemines Parish, so you will perhaps forgive me for this harshness), was your comment that “risks associated with such a drilling were calculated and regulated beforehand”. Were risks really calculated?! Here is what the WSJ (hardly a bastion of liberal thought) says: “after a spill in 2000, the [fed Minerals Management Service] issued a safety notice saying that such a back-up device is ‘an essential component of a deepwater drilling system.’ The industry pushed back in 2001, citing alleged doubts about the capacity of this type of system to provide a reliable emergency backup. By 2003, government regulators decided that the matter needed more study after commissioning a report that offered another, more honest reason: ‘acoustic systems are not recommended because they tend to be very costly.’ I guess that depends on what they’re compared to. The system costs about $500,000 per rig.” And that is only a tiny fraction of this pathetic agency’s (and administration’s) corruption.

    You see, there was no “calculation” under the Bush administration. Liberals had been doing the “calculation” and “risk”-evaluation before this mess [this is prudent, development of resources]. But when Cheney hosted his (secretive) meeting with oil execs, the only calculation was whether it made the oil companies uncomfortable in the slightest. If so, it was scrapped [this is reckless development of resources]. There is a lesson to be learned here, and it is frustrating that such a plain, important lesson is lost on you.

    I hope you don’t take offense to this. I will not unsubscribe, because your blog is great, informative and overall of well-written and put together.

    • By 2003, government regulators decided that the matter needed more study after commissioning a report that offered another, more honest reason: ‘acoustic systems are not recommended because they tend to be very costly.’

      The BOP failed to activate eletrically and hydraulically, even when an ROV plugged into it. An acoustic system would have made no difference whatsoever.

  4. While I tend to side with the other commenters on this topic, I do think that BP is not the only one to blame here. TransOcean and Halliburton as well as the US regulatory agencies who were in the back pocket of these companies need to pay too. There’s a whole lot of blame to go around.

  5. I agree with the first commenter, though I will not’ve said much worse than this (black power fist at the Olympics) and we’re really just here to get an image and a cursory description.

    The three companies involved are pointing fingers at each other and I’m guessing all three will try to prevent open investigations. BP may not be solely responsible but it’s responsible enough for very harsh consequences. The fallout from this is and will be massive for decades. That said, there is no way the US will be taking over a British company, there is no precedent for that claim. There is also no support for the claim that the economy will be rocked even more by the failure of BP..even if that were true, so what? A company messed up royally and if it fails as a result then so be it. They deserve to fail, not via govt punishment, but by diverting every single cent to recovery of the Gulf.

  6. My view for what it’s worth is we all want lots of the earth’s resources and we never really think about the consequences when we screw up ……….. Taking large companies isn’t going to replenish the fish stock or bring the ocean back to life – it will just replenish lawyers bank balances -money should be spent ensuring it never happens again and also just one observation if you have a pipe so long and in such a place where one small spill let alone a large one would cause havoc on the eco system why can’t it be shut off in sections and shouldn’t we now be working that all these pipes are made safe and can be dealt with in a timely efficient manner – was there no backup plan in place when this was in laid – did no one ask about worst case scenarios and how BP would deal with them?

  7. Well, you lose some you gain some. I AM subscribing (actually, I did a week or so ago – in my wordpress “blog surfer” template).

    For a professional’s view on the situation with the spill, see the series of posts by Tim Newman, here He’s a British oil and gas engineer and follows the story pretty thoroughly.

    Glad I found a NON-LEFTIST blogger with artistic interests, excellent concept and subjects and a beautiful execution. Thank you, TQ.

    Few notes aside:
    -no, the wildlife of Louisiana coast is not going to die: oil has been spilling into the oceans for millions of years – and is a part of an environmental landscape; it is a factor in creating that landscape. Even if some forms of wildlife will die – tough luck, this is how evolution works. Man-made disasters are also part of evolutionary factors – and in scale can not even compare to the one Nature (yes, yes, that sweet Gaia of your pipe dreams, hippies) creates. Life adapts. Some new creatures will come into prominence, instead of the ones extinguished by the oil spill – IF they will be extinguished. Which is, as of now, nobody can predict for sure, no matter how many $millions they get in government grants.

    Ahaha, I was waiting to see how the libs will manage to perform circus acrobatics and find a way to blame it on Bush. But never fear, they always will! With assured regularity of a schizophrenic. What a funny thread to read.
    No, we don’t need more regulation, including the oil industry. More – you don’t need more regulation in oil industry (or any other). If you value your lifestyle, your plastics, your gas, you car, your air travel, your heating, your synthetic clothes and “green” furniture made of recycled tires(didn’t it make you feel good?) – you don’t want more regulation in oil industry. You don’t fire specialists and exchange them for incompetent paper-pushers of various “grade” on their career ladder – unless your goal is to live in caves.

    Lefties so narrow-minded, they can even see they are hacking at the branch they are seating on.

    • The arguments of conservatives are so banal. Just a quick retreat into the straw man “they want us to live in caves” crap. You and your kind are simply unserious about facing the difficult balance between what should be regulated and what should not. We do not seek to “fire specialists and exchange them for incompetent paper-pushers,” rather to simply require inexpensive, prudent safeguards. The problem with these organizations is that they are terrible at preventing catastrophes but they are great at lobbying. It should be the reverse. This is obvious, unless you’re caught in the grip of right-wing hysteria.

      And no “circus acrobatics” are needed to blame Bush. He may have been right about a lot of things, but it was his VP who was in the unique position to ensure that the safeguards were used. It is you Palin acolytes who employ “circus acrobatics” to blame this disaster on environmentalists. People like you will believe anything once you put your mind to it.

      You try to trivialize the damage. But there are real consequences to this oil spill. 11 deaths, the Louisiana fishing and tourism industries suffering terribly, the wildlife and critical estuaries. Over a thousand miles of beaches threatened. A decent conservative would at least acknowledge the consequences.

  8. ABC News:

    BP’s safety violations far outstrip its fellow oil companies. According to the Center for Public Integrity, in the last three years, BP refineries in Ohio and Texas have accounted for 97 percent of the “egregious, willful” violations handed out by the Occupational Safety and Health Administration (OSHA).

  9. Well, I have to say that for the most part I do not require an artist or a compiler of art to have my political views.

    I would suggest that for at least 30 years under democrats and republicans, labour and covservatives corporations have slowly (and sometimes not so slowly) taken over government regulators. The most spectacular result is the BP spill, but there are others going on daily.

    If anyone here thinks that hasn’t affected the life of the planet they are living in a fools paridice. Bees and frogs are dying at an alarming rate and no one seems to know why or how to stop it. The beginnings, I suspect of a slow catastrophy.

    I’m sure we can all agree that with any luck we will be dead before our children and grandchildren are forced to live in the ecological disaster we create.

    BP is however responsible for this disaster, and by the way let’s not forget that there are 11 men who are dead because of this. Is no one responsible?

  10. It’s your blog, your opinion is your “right”(as long as they don’t regulate that one). Don’t sweat the unsubscribers, they will be constantly back checking comments on their comments (ego ya know).

    Some may be forgetting that oil is a natural product of the Earth, same as salt water, same as volcanic ash. This oil is in fact native to the land that it is now washing back onto, it’s not like someone brought it over from arabia and dumped it in our gulf.

    In the end, they will plug the hole, some animals will die, a few places will stink along the coast, and nature will move on. MEN, however will be grabbing at the wallets of BP, and ultimately through government incompetence, all the citizens of the world. When gas in America goes to $8/gallon, and a head of lettuce is $10, you really think that money is going to come from the gov.?

    Much of this could be caused by the build up of the last 40 years of regulation that forced the need for oil into dangerous places for extraction, when much safer places are available. For instance, there is enough natural gas in America to run most of the worlds energy needs for several centuries, without using a drop of oil from anywhere. America also has most of the worlds supply of coal and nuclear fuel, but those have been regulated out of existence.

    Notice the date on that USGS survey was 2008.

    • You seem to be kind of blase. The Exxon Valdez wrecked 21 years ago and still some animals have not come back, and still oil washes up on the beaches.

      One can live with the hope that one will die before Man destroys the natural world, and not really care what happens to ones children and grand children, or one can live and try to assure that things will get a little better.

      Or I guess one can close one’s eyes and wish with all their might, that nothing we do will make any difference. I’d say it looks like you should be able to get a job with BP.

      • still some animals have not come back

        Dinosaurs, for instance.

        One can live with the hope that one will die So what’s the problem? Quit using fuel, electricity, water; don’t consume food (any food, at all – since it’s produced with the help of fuel); stop wasting air and burden the soil with your walking. Just die already!

        you should be able to get a job with BP. I wish I was so lucky!

      • Did you mean to type blase’? As in no too concerned?

        Exxon Valdiz is a poor example of the conditions, if you were attempting to draw some sort of similarity to the recent BP spill. Check your history knowledge and educate yourself about the differences between sub-arctic and sub-tropical factors. Here’s a reference, if you are interested in a realistic comparison(I’m sure you aren’t).

        A quote from that reference I’m sure you won’t see:
        “natural oil that seeps from the seabed releases the equivalent of one to two supertankers of crude in the Gulf of Mexico each year.”

        Working for BP is not a life-long ambition of mine, but then more being more John Galt than B. Hussein Obama may be a factor.

  11. On the other hand – it shouldn’t be possible to fill the Gulf of Mexico *without* there being a criminal investigation. BP may turn out to be innocent, but such innocence – in the face of the evidence – needs to be established through a criminal process.

    • Exactly whom do you want to charge with criminal activity, Stephen?

      And should the f&**ing lawyers win, exactly who are they going to get the money from, and where are they going to pay in to? Perhaps you don’t remember, but tobacco was put out of business by government regulation, and taxing, and every penny went to education. Oh wait, they still operate. Are you really so brilliant as to think Oil is going to go out of business because no one can TRAVEL to the restaurant/bar/work just because they are using oil to drive their car?

      Oil is a NATURAL product of EARTH. Get used to it. Get over it.

      • Curious Eric…do you think the stockholders and the Board of BP would, if do-overs were possible, be willing to give up 10% of their future profits to meet USG regulatory compliance? Or do you think they’re happier with the results of pushing for policies of laxer government oversight? A shame you weren’t long on BP stock…

  12. How about we let Exxon-Mobil do some deep sea drilling off your coast and then cut corners that allow a major environmental catastrophe to develop that wastes your fishing/tourist industry in the English Channel for the foreseeable future?

    Seriously, for us who have been fighting our government’s policies about energy policy/wars for decades that’s a pretty Republican attitude you’ve got going. I don’t blame the English people for BP’s criminal negligence…but perhaps you need to be able to see and smell the pretty pictures of a monumental ecological disaster up close and personal.

  13. It’s my fondest wish that glibertarians like Eric get to enjoy the fruits of their free market ideology by having Big Oil discover an oil reserve underneath his house and proceed to recreate little Nigeria in his backyard.

    When are you moving to Somalia, Eric? No taxes or bothersome government there to spoil your Galtian utopia!

  14. This is such a great blog, I hate to muck it up with political debate. Needless to say, I will not unsubscribe because it is an excellent blog.

    But as someone with a rich history in southern Louisiana, it is hard not to respond strongly to such ridiculous and offensive messages being posted here. How offensive it is for the likes of Eric and ETat to suggest that the consequences are merely a bit of stink and a few dead animals. If you were to say such crap in Jackson Square or Grand Isle, you would immediately be carted to the insane asylum.

    And so what if the bullet fired at the victim is made of “natural product” organic material, or something artificial. Yes, oil is natural. So what, Eric? If I dumped oil into your backyard, would you be saying “no big deal – it’s organic”? Hell no. There is nothing wrong with insisting that natural resource development be done safely and prudently. No one is suggesting that we live in caves, just that safeguards be taken. Oil companies aren’t inherently evil, they should just be required to take care when undertaking inherently dangerous activity. Some accidents may happen, but this is not the case with BP, which is a serial offender of safeguard regulations. It is only when safeguards ARE used that we can honestly say that the accident is an acceptable consequence. We can have oil company profits AND healthful environments. What a shame that simpletons like Eric and ETat are too busy hurling their feces at their boogieman “b. hussein obama” to even reflect on the complexities of prudent resource development.

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