Friday, 11 June 2010

Poor regulation.

Just like sub-prime, if you dig, then you find stupid regulation behind, or at least contributing to, every disaster.

Ask yourself 2 questions:

Why is the gusher so difficult to cap? Because it is in deep water.
Why was BP drilling in deep water? Because they were not allowed to drill in shallow water.

Whilst ultimate responsibility clearly rests with BP who could have run multiple pipes, which I've read somewhere is industry best practice (I don't know - I'm not an oil engineer), the US Government too is partially responsible for its knee-jerk, reactive and slapdash approach to regulation, which puts political concerns and pork-barrell politics above environmental and economic concerns.

Every regulation has a cost, and it is rarely borne by the people the framers of the regulation intend it to be borne by. In this case, Louisiana shrimpers and British Pensioners have paid for the poor regulation of deep water drilling and the ban on shallow water drilling.

Governments: Fucking things up since 5,000 BC.



2 comments:

Mark Wadsworth said...

1. Well spotted.

2. There is a perfectly plausible argument that says when a government issues drilling licences (without which nothing would happen), they can impose any terms and conditions they like (and rightly so). The more onerous the conditions, the lower the price it gets for the drilling rights (and vice versa).

In other words, the USA has had its pound flesh from the proceeds of the drilling licence (plus all the fuel duty on the petrol that BP sold in the USA).

3. Obo uncovered a theory that says BP played fast and loose with 'safety' because the fine is capped at a certain low amount (like $75 million, or whatever). Again, the low level of the potential fine is another thing that pushes up the money that the govt. gets when it first auctions off the drilling licence.

4. And so on.

banned said...

"ultimate responsibility clearly rests with BP ", wot about Transocean, and Haliburton? Will BP counterclaim? The lawyers will be loving it.

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