ENDS Report 425, June 2010, p. 56 28 June 2010
The spill in the Gulf of Mexico is just an appetiser. The long-term effects of our addiction to oil will be far worse for the environment, politicians and the economy
Many years ago, in the days before political correctness ruled out such inappropriate metaphors, I wrote an article in a political magazine entitled “On kicking dead dogs”.
Its theme was the political advantage of continuing to pile the pressure onto an adversary that had already lost the argument. Dead dogs cannot kick back and you get the credit for having killed them. Few political dogs can ever have been as dead, or kicked so hard, as BP.
No previous pollution event has come close to inflaming the level of public anger now on display in the US.
This is not just because of the scale of the spill’s impact on either wildlife or livelihoods, appalling though it is. Other pollution events have been even more dramatically harmful to wildlife. Arguably the fishing industry causes worse, though less visible, damage to the marine ecosystem every day. The bankers certainly did far more and probably much longer-lasting damage to livelihoods.
This uncommon depth of public anger is partly explained by the way this spill has made everyone from the US president downwards feel and appear to be helpless.
Frustration quickly turns to anger when nothing can be done. The video of the remorseless flow of oil from the well was fuel enough for anger. This was compounded when even the partial success in capping the well collected three times as much oil daily as it was claimed was being released.
It is not wise to make a president seem helpless. Helpless presidents do not last long. It would be a mistake to see Obama’s boot on the throat of BP as simply a blame game. The blame will come later. For the White House, this has now become a matter of political survival.
BP has become a dead dog and the president has little choice, if his administration is not to be fatally damaged, but to go on kicking it until the oil stops flowing.
Blame is better left to the courts. If Exxon Valdez is anything to go by, they will be feeding on this spill for decades to come. Learning the lessons is more important. Even before the full story of what happened has appeared, there are so many lessons it would require a large book to do them justice. Here are just two that have occurred to me:
Regulatory capture is no friend of a high-risk business. It is clear that the relationship between operators and regulators in the Gulf had grown too intimate. This fosters a culture of complacency where it is all too easy for marginal increases in risk to become qualitative changes without anyone noticing.
Weak regulations and weak regulatory agencies, for all their apparent appeal, undermine a company’s ability to manage its real risks. BP may have saved many millions of dollars under the lax supervision of the Mineral Management Service but the passage beyond the bounds of its technical competence that this permitted has cost it many billions.
Reputation is an asset that is difficult to value. It can take years to construct and it can be lost, as BP has demonstrated, in hours. There are real benefits to companies from a good reputation as a responsible environmental manager. These include everything from a lower cost of capital to preferred access to resources and higher staff retention. But few companies manage this asset with the care and attention they devote to more tangible assets.
Large companies like BP operate as a constellation of individual business units, each accountable for its own performance. But reputation is indivisible. This creates an asymmetric reputational risk profile.
All of the benefit of the corners cut by the BP business unit working in the Gulf of Mexico went to its bottom line. The reputational risks, however, were spread across the whole of BP. In other words, for a marginal improvement in the performance of the Gulf business unit, the value of all the other business units in BP were put at risk.
But fun though the sport of kicking BP may be, this should not obscure the more important lessons from this disaster. BP was drilling for oil at the limits of its technical competence on our behalf. We are all still far too inclined to think that damage to the environment is an inevitable and acceptable price to pay to keep our economy growing.
What this oil spill is making starkly clear is that large-scale damage to the environment is also damage to the economy. The cost of cleaning up the economy after this spill will far outweigh the cost of cleaning up the environment. It may also take longer.
We will not, of course, count all the costs of the environmental damage. And even more important, a lot of those costs will be met by ecosystems services we rarely pay for.
In this respect the Gulf oil spill is only an appetiser for the main course of the climate change caused by our relentless use of oil and other fossil fuels. That, too, will leave presidents helpless if we do not act a lot faster and more ambitiously than at present.
On some recent projections, we will already be living in a two-degree world before new deep-water oil wells currently being drilled have reached the end of their lives. There will also be wholesale economic destruction on a scale that makes what we are witnessing in the Gulf look minor.
Unlike the oil spill, the impacts of climate change on the environment and the economy will be irreversible. Getting off the oil hook as fast as we possibly can is now an imperative. It will reduce the level of unmanageable risks to both the economy and the environment and preserve some prospect of a decent life for everyone on the planet under 40.