Disaster, Heartbreak, and Unavoidable Trade-offs
By Robert Higgs • Wednesday June 30, 2010 8:49 PM PDT • 13 Comments
I received a message today from someone who questioned the position I had taken in a recent op-ed article on the Deepwater Horizon disaster in the Gulf of Mexico. Because I was unable to get a reply through to the person who wrote to me, and because others might have the same concern he raised, I am placing his question and my reply to him here.
He wrote:
The last paragraph of your most recent article puzzles me. You say: “The oil pollution in the Gulf is already hurting residents, workers and business owners and causing heartbreaking damage to marshlands, beaches and the wildlife that inhabits the area’s waters and wetlands. Let us hope the terrible situation will not be politically leveraged into measures that cause even greater damage to the national economy.”
So if I get this right, you are saying that heartbreaking damage is being caused, but “keep on drillin!” But your concern is the national economy. What happened to preventing the “heartbreaking damage?”
I replied as follows:
Virtually everything people do carries risks. Certainly every form of production does so. All manufacturing processes are risky — as a young man I worked in a factory where I saw a man’s hand ground to pulp when it was caught between two large gears of a machine. All farming activities are risky — as a young man I worked on a farm where a man was crushed to death by a tractor that lurched forward while he was underneath it doing repairs and another was killed when a tractor he was operating on the side of a ditch tipped over, throwing him off and crushing him beneath its weight. All transportation is risky — thousands die in traffic accidents each year in this country. All of these things are heartbreaking. Yet, for good reason, we do not imagine that we would be better off if we forbade manufacturing, agriculture, and transportation.
The Deepwater Horizon accident that continues to foul the Gulf’s waters and shores was an unlikely but extremely destructive event. The damage it is causing is heartbreaking. But forbidding oil drilling in the Gulf would also cause immense damage, not least to the lives and livelihoods of hundreds of thousands of people whose incomes are tied to that activity, not to mention all those who value the products made from the oil extracted from pools beneath the ocean floor. We can’t have all good things and no bad things. In life as it actually exists, we must choose and make trade-offs.
BP appears to have been negligent in its management of sinking the well, and almost everybody concerned with minimizing the environmental damage after the explosion has screwed up, more or less. The situation is tragic. Yet it is not one that anybody wanted. It is a terrible contingency in an unavoidably risky world. As I mentioned in my op-ed article, if this situation becomes fuel that feeds the creation of greater regime uncertainly by fostering political actions to alter a variety of regulatory rules and laws, then many damaging consequences will ensue, and they will harm people around the world. I hope that result will not occur.
Meanwhile, here where I live in southeast Louisiana, we have our hands full in dealing with the consequences of the current Gulf mess. Enough is enough. Shutting down a big part of our economy will only make a bad situation worse.
Of course, we should all learn from this tragedy. Oil companies probably need to adopt different, less risky procedures for sinking and operating wells in the deep waters of the Gulf. Federal, state, and local government officials need to prepare better to cooperate and to act expeditiously and intelligently when such events occur. (One way to do so might simply be to obey the law as laid down in the 1994 National Contingency Plan appended to the Oil Pollution Act in 1990, but evidently completely disregarded in the present emergency.) And the public needs to develop a keener appreciation of how opportunists of various stripes rush onto the scene of such disasters to exploit them for the attainment of their own longstanding objectives, not letting a “crisis go to waste.”
Tags: Disaster Management, Economics, Energy, Environment, Politics, Regulation 
You did not mention the liability cap. Do you think it should be removed?
Jan | Jul 1, 2010 | Reply
Bob, right on!
Living in the Key West area, we too have been devastated, but nary by a drop of oil. The media “the sky is falling” ravings have caused many folks to cancel vacation plans. The results are a noticeable downturn in restaurants, fishing charters, etc. Many here were already on the edge because of the economic downturn. The media has in essence yelled “fire” in a crowded theater, yet stand on their First Amendment rights to free press. They are reporting conjecture, not facts. Meanwhile BP has two offices, one in Marathon the other in Key West, paying verifiable claims caused by the oil leak (it is not a spill).
Equally importantly is the fact that this well site is NOT even in the US, but is in international waters. No US permits were needed, but were obtained partially because the oil would be brought directly into the US, partly because it is supported by US based infrastructure, partially because it would be a windfall to the US government, and partially because the US government was willing to cap liability limits for accidental damage, with US taxpayers covering any remainder. Despite claims that BP will pay all damages, the government and BP did have this liability limit contract in place and to try to change it after the fact will kill all future drilling making us all the more poorer. Engineering advances one failure at a time, from failures in bridges, steam boilers, ship building (Titanic) to the Space Shuttle. As you correctly point out, life is full of risk.
This well could have been drilled by the Chinese, and in response to the damage they would probably said “sorry about that”. Would we be willing to nuke them in response for damaged beaches and wildlife?
The “safety violations” claims may well be exaggerated. I would like to see a list of the actual violations. In my experience working with government, these violations usually far surpass the moronic level. Items such as incorrect paint color on hard hats, improperly marked circuit breakers, improper type of “exit” signs, lack of “fire evacuation plans”, lack of “bomb threat” instructions posted at each telephone, fire extinguishers placed 3 inches too high or too low, etc, etc, etc. These are examples of violations I have actually lived with and I’m certain the BP rig had many similar non-safety “safety violations”. The safety inspectors are truly anal about these things. One true example I recall vividly when I ran a fairly large operation was when a truck came by transporting oxygen and acetylene welding bottles while I was with an inspector. The speed limit was 5mph and the safety inspector wrote “no seat belt in use”. What I noted, but did not tell him, was the standing bottles in the back did not have the protective caps on them. If a bottle falls over and shears the valve, the bottles become rockets. I once saw an oxygen bottle pierce a 3/16″ steel ship hull and travel 1/2 mile out to sea, yet this “inspector” only saw the seat belt violation!
Sorry to go on so long and steal your valuable time, but our very lives depend on oil. These facts are missed by our enviro-commando brothers as they fail to see the economy as a whole, seeing individual trees rather than the forest.
Thank you so very much for your tireless efforts in the war against ignorance.
Yours in liberty,
Al Sledge
Big Pine Key Florida
Al Sledge | Jul 2, 2010 | Reply
If the government were to get out of the way and let the market operate, the whole problem would be completely solved and there would be no oil washing into marshes and onto beaches. Certainly some type of court decision or mandate might be necessary to hold those who were negligent accountable, but the executive branch strong-arming BP to pay them $Xbillion to fix the damage caused ignores numerous mechanisms which would prevent the majority of the damage in the first place.
The simplest solution would be to require BP to pay $10/gallon (about $500/bbl) for every bit of oil presented by anyone who has recovered it from the Gulf using non-damaging methods. Relax or ignore the EPA rules that require a certain level of cleanliness for any water discharged overboard during recovery efforts, that water would still be cleaner than what was taken out. Allow anyone, private, corporate, foreign business or foreign government, to recover oil and present it to BP for payment.
If such an effort were allowed the Gulf would likely end up cleaner than it was before the accident and the incentives to BP to stop the leak would be enormous.
Or, we could continue to have the government bully BP for payments that will mostly go to the government while oil continues to gush and wash ashore.
Keith Hamburger | Jul 2, 2010 | Reply
Keith that’s not a bad thought. But what would stop me from buying oil at market price and bringing it to BP ?
Robert Vertullo | Jul 2, 2010 | Reply
That’s bloody ingenious, Keith.
I don’t think you can set an arbitrary $10 price though . . .
Make some real evaluation of what it would cost the government to collect that gallon and pay out 20%, or what it would cost BP to collect that gallon and pay out 110% (these numbers should be pretty damned close)
Orville Wyatt | Jul 2, 2010 | Reply
Around the time of the Valdez disaster, our team discovered and invented an amazing adsorbant that was perfect for marine spills. It adsorbed only oil, and would float indefinitely, leaving the water clear. Also, it removed oil safely from any surface: feathers, hair, skin, fur, trees, sand, etc.
At the time, we thought this would be an instant and huge success. How wrong we were.
Reasons? There are simply no penalties or laws applied to oil execs to clean up a spill. The execs simply walk away scot free: they did in Valdez, and they do now – the BP exec is enjoying his yacht with no concern or guilt for the incredible and irreparable damage.
While I agree with Higgs that risks are ever present, the ensuing damage for oil extends beyond a simple farm incident. Society must hold oil execs accountable.
If anyone is interested in a complete solution, we can be reached at rg.pigl@gmail.com
thanks.
alzurzin | Jul 4, 2010 | Reply
I agree completely as most of our problems can be traced back to government meddling in the market. But who will enforce your proposed $10/gallon fee? Equally important is how would the windfall be spent?
It is impossible to tax or even fine a business. The business must either pass the fine/tax onto the consumer or fail. In the days of the Windfall Profit tax I was part owner in an Kansas oil well. Government capped oil at $12/barrel. When the cap was removed the price skyrocketed to $25 which included the windfall tax. The consumers unknowingly paid the tax at the pump while I made back my investment and a fair (to me) profit.
BP has the experts, government has only force. Thus when the only tool you have is a hammer, every problem looks like a nail. If it were not so sad, it would be funny. The Keystone Kops are protecting us! Yeah, right.
Al Sledge | Jul 4, 2010 | Reply
Correction to my earlier post:
The UN Convention on the Law of the Sea (1982) stipulates in the “exclusive economic zone” section, that territorial waters for mineral extraction (oil included) will extend the territorial waters to 200 miles. Up to this time the 12 mile limit was considered internationally consistant. Beyond that limit minerals are a “common heritage of mankind” and any profit will be taxed at a rate set by “the international committee”.
The US has not yet become a signatory to this Law of the Sea Treaty, known as LOS, but the better acronym is LOST. A number of high ranking US politicos are backing it including Ms. Palin. I do not mean to pick on her in particular, as she and others appear to not fully grasp how this will forever hand over a future free (freer?) market directly into the hands of the UN and allow the UN to directly regulate and tax American innovators. The UN members are not exactly known to be a den of free market supporters, but rather appear to strive for one world government under socialism.
In summary the US government is using the 200 mile limit as specified in the unratified, unsigned treaty as if it were law. Very clearly it is not, at least in my lowly opinion. Smarter people than I should be consulted.
I have included links below as a starting point should anyone wish to delve further into this.
UN Summary:
http://www.un.org/Depts/los/convention_agreements/convention_historical_perspective.htm#Key provisions
Article in opposition:
http://www.dailypaul.com/node/5440
Article in support:
http://www.globalsolutions.org/in_the_beltway/united_states_and_law_sea_time_join
Al Sledge | Jul 4, 2010 | Reply
Bob, people who don’t live anywhere near Louisiana (as you do) don’t want oil getting on your bayous. So, even though they DON’T OWN the bayous (nor live near them, nor have any relationship to them other than burning the petroleum products made from oil extracted near them), even though they DON’T OWN the oil or the sea or its bottom from which the oil is extracted, have employed powermongers in Washington to stop people in Louisiana from bringing up that oil.
When these people find the price of the fuels they burn rising, they’ll deny/overlook the effect of this abuse of power in reducing their standard of living. They can’t/won’t connect the dots, chiefly because those powermongers in Washington grow so rich from the power they seized.
When statists whose gas prices have risen complain (again) to Washington, new powermongers (and/or the same ones) aplenty will rush forward to “solve” their problems through the acquisition of . . . more power.
N. Joseph Potts | Jul 5, 2010 | Reply
What I see missing from much of the media discussion is the losses BP is taking by not having this rig producing, not to mention losing part of its potential in the Gulf. For many of the damaged fishermen, etc., to me the logical fix is to give them a share in the production once the rig is on line commensurate with their loss. I like the idea of oil-cost clean-up paid for based on recovery, although what that price is would have to be fair and equitable to all parties. Unfortunately the socialist world we live in will not allow either of these to come into being. The bureaucrats and their minions must make the most out of this opportunity.
Ernie Hopkins | Jul 6, 2010 | Reply