The Last Bailout

Millions of barrels of oil are leaking into the Gulf of Mexico, and it appears that there is little anybody can do. People are frustrated. They are angry at BP for causing the leak and they are angry at our government. They want the government to do something… anything.

Thousands of birds are covered in oil, and the government has yet to send one deep fryer.

We have become so addicted to oil that even now many people don’t see anything wrong with drilling a well a mile below the surface of the ocean to get to oil that lies another couple of miles below that. We just want to know why we can’t turn the damn thing off.

Some are calling the uncontrollable leak Obama’s Katrina. Dmitry Orlov, who survived the collapse of the Soviet Union, is calling it Obama’s Chernobyl. It’s a better analogy for a couple of reasons.

Katrina was a natural disaster that the federal government was slow to respond to. Chernobyl was a technological disaster, the result of the need for more energy and a willingness to ignore risk. Response time is not the problem. We are having a hard time figuring out what to do next.

Sending a deep fryer makes as much sense as holding a press conference to announce we’re in control. And if you’re expecting the government to be able to do something about this, you might as well be calling for a deep fryer.

The experts all work for the oil industry. That’s where the money is, unless you can get a job at Goldman Sachs. The experts get paid to figure out how to get oil. They don’t worry too much about how to stop getting it. There’s no money in that.

There are government agencies that are supposed to review what the oil companies are doing and make sure no laws are being broken. But these agencies are not there to stop the oil companies from getting oil.

All the easy ways to get oil are gone, so we’re forced to stick miles-long straws into the sea floor, or buy oil from people that hate us. Deepwater oil is better than foreign oil, but it turns out drilling is easier than deepwater repair.

The experts are going to try another containment cap. They are hoping this one works; eventually something similar worked for Chernobyl. I’m not sure what comes next.

Matthew Simmons, an investment banker who specializes in energy, thinks a small nuclear bomb would stop the leak.

That sounds like something out of an episode of Lost. The leak does look sort of like the Black Smoke Monster. Maybe BP should send Desmond down there next.

Maybe BP should try to plug the leak with an upside-down statue of St. Joseph. Then the US could sell the Gulf of Mexico to China for about half a billion dollars. This would cancel some of our debt.

It seems everyone thinks this leak could have been easily plugged by now. James Carville said that if this happened in the ‘90s, Bill Clinton would have swum down and fixed the thing himself. Carville visits this planet every so often to remind us how good things were under his old boss.

Many people want to blame the president for not fixing this yet. The last time so many Americans counted on Obama to fix things this fast was the week after his inauguration.

Then he won the Nobel without really deserving it, and everyone said that you couldn’t possibly reward someone who has not had the chance to prove himself first. We don’t reward expectations.

It turns out to be okay to punish you if you don’t meet those expectations.

Now, people who complained that Obama was running an out-of-control, big-spending government that took over private companies like General Motors are complaining that he isn’t taking over British Petroleum fast enough.

People who thought government should not get involved in health care, that to do so would cripple the ability of big insurance companies to make a profit, are outraged that government has not gotten involved in the business of oil.

They want an immediate government response. It doesn’t seem to matter anymore that when the government gets involved in anything, it gets bigger. That a big government bureaucracy can’t get anything done efficiently. That we can’t afford to increase the size of the government. Or that if we can only keep the government out of it, entrepreneurs will step in and innovate, and new businesses will get created, and the Invisible Hand will fix everything.

We face a serious problem. If we stop the oil leak we are only dealing with a symptom. The problem is so serious that I should not be making jokes about it. That would seem like a waste of time. It would be better now to focus on solutions.

The solutions are not easy or obvious. They often appear contradictory. We are going to disagree.

In recent weeks I have heard candidates running in November’s elections talk about how government needs to get smaller and needs to create jobs. They have said that if they get elected they are going to slash the budget by shutting down unnecessary parts, and at the same time they will fight to protect Connecticut workers by keeping naval bases open.

We want all these things. But we can’t have them all.

In the past few decades the idea that there is no such thing as good government has taken hold among many of us. That becomes a self-fulfilling prophecy. We govern ourselves until enough of us no longer think that is possible.

But most of us still believe there is a United States that can find a way to overcome any challenge.

It can be a waste of time for us to argue about whom to blame, to endlessly critique the performance of our leaders. It’s a great sport when times are good. And we should be watchful that our leaders don’t make mistakes that go uncorrected or ignore our will. We can disagree about how we get things done, as long as we eventually make a decision and work together.

But that is all we do now. The solutions are not easy or obvious. They are going to take time and sacrifice. If all we do is argue, then we are guaranteed to fail.

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3 Responses to The Last Bailout

  1. scottakam says:

    It seems pretty clear by now that oil leak was caused by 2 main factors.
    1. BP’s incompetence.
    2. Federal regulator’s incompetence.

    To blame all oil companies or say we need to stop drilling is way too simplistic. Even if everyone were to start driving an electric car tomorrow, we would still need oil for thousands of other things. Oil and oil drilling are here to stay.

    I’m not a Tony Hayward fan but I watched last week when he testified before Congress. He was asked to compare the “tough” European drilling regulations to the USA. He responded by saying that the regulations in the USA are far more strict than anywhere else in the world that BP drills. Regulations are only useful if they are practical and enforced.

    Argue:
    1 : to give evidence of
    2 : to consider the pros and cons of
    3 : to prove or try to prove by giving reasons
    4 : to persuade by giving reasons

    I would argue that we as a country have not been doing enough arguing. Without argument there can be no solutions.

    “People generally quarrel because they cannot argue.” – G. K. Chesterton

  2. paul says:

    It looks like BP is the biggest violator of safety regulations among the big oil companies (I saw a statistic that showed something like 760 BP violations to 1 for ExxonMobile). But this may just make BP the Lehman Brothers of oil companies… the one that got hurt doing what everyone else managed to survive doing themselves. Seventy-five percent of the rigs in the gulf have only one blind shear ram, for example. It’s a number of things, and BP may have been trying to cut all the corners, and when you do that, whatever regulations you have end up looking like paper snowflakes.

    Enforcement is key. Stopping all drilling is a tough call. Consider the people being put out of work, more than the amount of oil being extracted from the gulf, which is a small amount in the global picture where you need a new Saudi Arabia every three years. (See this graph for just how little unconventional liquids contribute to supply, while carrying other risks.) It is hard to say whether it’s worse on the jobs or on the eventual price shock (which will probably be caused by speculation rather than actual supply issues, lots of variables here).

    Yes we need oil for thousands of things. We need more oil than we can spare to make electric cars. Oil and drilling are here to stay, until they’re gone… and that just about seals our fate. My position is that when we are ready to start the serious argument about what to do, and stop the side issues like electric cars and carbon caps, it will be too late. The problem will be too big, and many people are unable to argue in the productive way you describe; they are lazy and quarrelsome. Not that I’m giving up.

  3. scottakam says:

    The problem with the energy debate is that people conflate all forms and applications of energy. For example; most people agree that it would be nice to use less oil. A typical environmentalist will say yes, we need more wind and solar. The problem is that wind and solar are used mainly to generate electricity. In the US we use almost no oil for generating electricity. You could put a windmill in every yard and a solar panel on every roof and we would not use 1 less drop of oil! In the US we mainly use oil for transportation (cars, trucks and airplanes…). Airplanes are very tough to get off oil so we are really talking about cars and trucks.

    In my humble opinion after many years in the industry the answer for cars is EV(Electric Vehicles) and extended range EVs. Biofuels and fuel cell vehicles are unnecessary diversions. I was at a conference in California full of engineers and scientists (no oil people). A speaker started talking about fuel cell cars and the entire crowd burst out laughing. The technology already exists for EVs and EREVs. The trouble right now is that it turns a $20k car into a $40-50k car. The focus now is on getting the costs down. As costs come down and oil prices come up they will meet in the middle and we will all be driving electric cars.

    For trucks EV makes sense for short range and delivery trucks. For long range natural gas and increased rail use makes sense.

    I know you are going to say that our grid could not handle it. Not true. The majority of the load would be from personal vehicles. They can be charged overnight when the grid load is at it’s lowest and prices are the cheapest.

    All that’s left to do is wait for EVs to make economic sense(probably 5-10 years) and the oil problem takes care of itself. Once we stop using oil for transportation the supplies will last for millions of years. See how easy that was?

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