Friday, September 10, 2010

Whom Do You Trust?

Pinocchio is startled by the growth of his own nose
Who's surprised by this anyway?
Whom do you trust more: the federal government or oil companies like BP? Neither has exactly covered themselves in glory the last many years, and both have given us many reasons to doubt their commitment to the public's interest in a stable and sensible energy policy.

The question of trust is at the heart of deciding what to do about the federal government's current moratorium on deepwater drilling, which has sparked predictable polarization. Environmental watchdogs insist that the consequences of further disasters are unacceptable to an ecosystem already severely stressed. Gulf coast residents in the fishing and tourism industries largely, but not completely, share that view. There is considerable scepticism about when or whether to resume, and under what conditions.

Oil executives and their allies argue that the moratorium should be lifted immediately so full-on oil and gas exploration can resume. They give three broad reasons: (1) we need the oil; (2) we need the economic benefits; and (3) we've learned the lessons and will be good environmental stewards. Are these compelling reasons, and to what extent can we test them, or must they be taken on faith?

It is true that we need the oil. Every part of our economy requires the devil's excrement, preferably cheap, to function at all. We are addicted to the stuff. The irony of oil's cheerleaders making this point is sadly lost on them--the extent of our utter dependence calls for a much more aggressive program of developing alternative energy sources, yet most oilman are half-hearted at best in their advocacy for resturcturing our energy economy, and shrilly oppose any change in the regimen of subsidies that tilts heavily to them.

Their agitated insistence on deepwater drilling is also ironic considering the companion assertion that the United States has ample domestic supply if allegedly burdensome restrictions and regulations could only be removed. Yet the keening to drill in ever-deeper water at escalating expense shows clearly that land-based supplies are relatively depleted. Shale, tar sands and other sources are substantially harder, messier, and more costly to produce. Whether we have plenty of these sources as the oil lobby claims, or not, the relatively cheap and abundant domestic supply on which the economy has long depended is gone.

Immediately lifting the moratorium may well yield economic benefits to the oil companies, but how about to the rest of us? The price at the pump appears little affected, perhaps because the loss of output from deepwater drilling has been easily replaced from other sources. (Offshore production comprises 30% of US output, 90% of that is in the Gulf of Mexico, and 70% of that is in deep water. Since US output is 10% of the world total, the drilling moratorium covers less than 2% of world output.) Admittedly the ongoing economic malaise has cushioned the blow, but the economy's evident ability to absorb the decreased production due to the moratorium suggests the economic impacts stem from demand destruction, not supply constraints.

The oil shills argue that if the moratorium were to continue much longer the oil companies will move their fantastically expensive rigs, which cannot feasibly remain idle long, somewhere else, like Nigeria, taking jobs with them. Does anyone seriously believes this? Moving rigs a few thousand miles over open ocean during hurricane season seems a rather idle threat, but even if they did so, won't they still need the crews to operate the rigs? Are there truly vast numbers of skilled oil workers sitting around unemployed in Lagos waiting to replace American workers? Despite questions about the profesional conduct of some workers and managers at BP, oil companies still much prefer to stick with the workers they know and have trained. As of two weeks ago, only 2 of the 33 deepwater drilling rigs in the Gulf of Mexico had moved to a foreign location. Who is to say that globe-spanning oil companies might not have shuffled a tiny fraction of their equipment around anyway? Thus far, economic costs of the moratorium have not been the dire calamity some predicted. In part, this is due to increased activity onshore as well as an increase in drilling rigs in the Gulf.

We are told that they have learned the necessary lessons from the BP Deepwater Horizon disaster, yet there can be little confidence that this is so. First, there is a general disinclination to truly accept responsibility.Second, we heard promises about lessons learned and better practices after the last disaster that killed a whole bunch of people. Third, the top people at BP, up to and including the Board of Directors, have known for years that they have a systemic problem of prioritizing profits over safety, yet nothing has changed because they plan it that way. Will this time be different? Sure it will.

Some insist that a moratorium will drive increased oil production to places where practices are much worse, increasing environmental damage overall. So much better, we are told, to drill here where environmental practices are better. This is a very cheeky argument when one considers why drilling and exploration practices here are (arguably) better. Yep, it's those government regulations! Environmental practices are so much worse in places like Nigeria because the industry is more loosely regulated there and the workers less trained and hence less skilled in cleaner production. It saves money.

Industry argues that many regulations on them are not necessary, are too restrictive, too costly, and so on, and they should get some "relief." Yet by also arguing that the moratorium should be lifted lest production move to dirtier venues, they impicitly endorse the value of those same environmental regulations. It also gives the lie to the earnest insitence that they have learned the right lessons. If there were serious follow-through on environmental and safety practices that were driven by the oil companies themselves, then why would there be any disparity between the US and Nigeria? It is only the difference in regulation and the resulting difference in industry commitment that can account for the difference in environmental outcomes.

Unsurprisingly, all the industry rationales for lifting the moratorium turn out to be self-serving. Yes, we need the oil, and will continue to need more oil commensurate with the obstruction and foot-dragging on making the urgent and necessary transition to other forms of energy. We need a better economy and its benefits, no doubt, but veiled oil company warnings about the impending export of oil jobs are not compelling and turn out to be idle threats. Nor are these jobs inherently superior to those in fishing, tourism or renewable energy. The oil industry has certainly not earned the trust of any but fools, sycophants or people with short memories. Their actions belie the supposed learning of any lessons, and their words about environmental responsbility outside strict oversight are falsified by the ongoing history of their actions.

So whom should we trust more, oil companies or the government? Perhaps it is more accurate to ask which one we mistrust the least. One routinely risks death and disaster for profits; the other puts profits second after prudence. Is not the primary role of government to protect the country and its people? Seems like that's what they are doing. Unlike industry's pretense of commitment to safety and to the environment, the government is not lying to us about the costs of their actions. If you believe profits matter more than go ahead in your flint-hearted denounciation of the moratorium, but you are siding with an industry whose words are as slippery as their product.

Update: fixed typos

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