Posted tagged ‘bp’

Flaws or Strengths?

June 7, 2010

The news media is having a field day listing President Obama’s flaws. Jobs have not returned fast enough. Banks are still acting poorly. Healthcare costs too much. Our troops are still in Iraq and Afghanistan. And, the BP oil leak is still leaking. What’s more, Obama is not mad enough.

Some pundits think that President Obama should show his feelings much more visibly. They connect this coolness to lack of performance on the part of his cabinet. If Obama kicked ass, we would see some results, or so the story goes.

There is also an opposing but not very well publicized.  It says that President Obama is actually showing America how the office should be run. They would say we don’t need heros as Presidents.  What we need is leadership that prevents (or minimizes) the occurrence of big problems.

The roots of the problems President Obama has had to deal with predate his coming into office by at least 8 years (some may have started even before George W Bush’s watch). What is clear is that for the entire 8 years of “W” time, nothing at all was done to try and mitigate any of these pressing issues. It can be argued rationally that instead a lot was done to acerbate them and set the stage for much bigger problems. And why?

The Bush Administration was all about “right now” with decisions and policy driven by ideology and the next election. Reform of health care that would have fixed it financially would have meant raising taxes or reducing benefits. Both actions were deemed risky verses election hopes. This was cowardly and short sighted.

On the contrary, the Obama Administration has attempted to put in place policies that have longer term horizons (although so far, Obama has not addressed the cost of health care). The steady, in control approach to the Gulf oil leak raises another Obama characteristic. He listens to professional advice and takes measured steps that will resolve the problem but not necessarily as quickly as the public might erroneously be lead to expect.

So the answer to the question “are these Obama characteristics, flaws or strengths” will have to wait a bit longer. If the economy rebuilds on a solid foundation, or the wars in Iraq and Afghanistan are wound down smoothly, or BP oil lead is stopped (and BP is held properly liable), it will be much more apparent that the Obama style has much more substance to it than a shoot first, think later one.

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Gulf Blues

June 4, 2010

How does one make a bad situation good? The Obama Administration is learning about that right now. The BP Gulf oil spill is the teacher. The American public, if they are wise, can also learn. The question is will either party learn?

Drilling a mile down and then another two under the sea bed, the BP drilling was truely in “unchartered waters”. Experience, science, and preparation are all working against a prompt sealing of the leaking well head. Never the less, with ecological damage mounting, the call for Presidential action is deafening.

It is strange and somewhat humorous that many of these same people calling for more Presidential action, and in a sense almost blaming President Obama, not so long ago called for smaller government and less regulation. This is a lesson in the facts of life, a coin has two sides.

This Gulf disaster could not be a clearer testimony that there is a critical role for government in a highly developed economy. The financial sector melt down in 2008 was a loud signal which, to this day, many people refuse to acknowledge as a call to action.

Regulation to be sure can be over done. On the other hand, so can “free enterprise”. The role of government is to place reasonable bounds on the “invisible hand” so that it does not unduly take from the public more than it gives back.

BP – Katrina

May 28, 2010

There are many who are drawing comparisons between George W Bush’s debacle in the response to Hurricane Katrina, and President Obama’s handling of the on-going BP oil disaster.  The BP incident appears to have been a serious of human errors which lead to an inadequate safety culture and outright misjudgements in the drilling and start-up process.  on the other hand, Katrina was a natural disasters that was magnified by under maintained levies.   The questions should be, “what could have been done to prevent these incidents, and once they occurred, what could have been done to resolve them?

History is reasonably clear about Katrina. The Bush Administration practiced their ideological belief that Government was an impediment to progress and had gutted the government agencies whose role was to respond to natural disasters. In addition the Bush team had diverted Corp of Engineers funds from levy maintenance. The results, once the Hurricane struck New Orleans, were easy to predict.

The Obama Administration made a similar but fundamentally different mistake. In their relatively short time in office (17 months), the White House felt comfortable in overall statistics and did not try to understand the process that produces the good statistics.

There are a lot of drilling rigs in the Gulf, and there are some that are producing at similar depths as the BP rig. The Obama team reasoned that good results must mean the Industry knew what they were doing.

Good results result from good processes followed each and every time.

The Government has concluded that it is in the US national interest to continue drilling in off shore waters. Given that, the Obama Administration must change the regulatory climate and insist that oil explorers follow strict guidelines when drilling. The government must also have the means to verify that the process guidelines are in fact being followed. There is no room for the Bush Administration’s “less government”, and the Obama view that “government is good” is equally useless unless government in fact performs.

With Obama’s view there is hope, with Bush there is not.

Stuck in a Groove

May 24, 2010

The media is consistent if not always relevant. Today the record is stuck in the Gulf oil drilling disaster. What are the lessons that are emerging?

The more skillful politicians are telling us that we must wait until the true causes are established. The Louisiana fisherman and tourist industry owners are demanding assurances that they will be compensated for their losses. The oil industry (except for BP) is keeping a very low profile and avoiding any presence in the world of public opinion. The Obama Administration is waking up each day to a very bad dream, one that is getting worse each day.

  • There are strong indications that BP should lose its rights to operate as a drilling or manufacturing (more precisely refining) company in the US because they have shown an inability to run their operations safely. This is a bit akin to what should have happened to those banks “too big to fail”. BP should be denied the right to operate in the US and then systematically broken up (say, exploration, refining, and retail) and sold off.
  • There is also growing indications that the government agency set up to insure proper operation for off shore drilling relies too heavily on the honesty and competence of the driller. There is too much trust and too little verification. This agency has been broken up but what emerges as the new regulatory authority will be the key to whether we have learned from this disaster.
  • Underlying all this, as usual, is the American public who want the fruits of the drilling but does not want to understand the problems that come with it. The deep ocean drilling is a tribute to technology. The BP rig sat one mile above the ocean floor and still was able to drill several miles further to find the oil and extract it. There was technology also available to do this safely but for reason not fully explained today, that technology was not used properly, hence this disaster.

While it is important (or at least interesting) to know about the terrible impact on wild life and the shore land itself, the overwhelming feeling one gets is hopelessness and antipathy. The media might do more good directing their attention on the proper role of the public, the government, and industry in the greater energy question. Banning BP from continuing as a full service company in the US, might just wake up the industry. Tying this disaster directly to the apathy of the public might just help Americans connect the dots between regulations and protection of the greater public. Holding legislators to the results of what they regulate might lead to a much more serious approach. (It does not help matters if regulators put in place rules that essential prevent exploration, the goal should be to do the job properly each and every time).

The Gulf Disaster

May 17, 2010

The oil disaster taking place in the Gulf of Mexico just off the coasts of Louisiana, Alabama, and Mississippi is the result of human failure. The only question is whether it is one human or many.

Most disasters result from a series of rare events aligning. The Gulf incident is most likely the same.

Why would a company as large as BP not own its own drilling rig? Why would a company’s whose survival was connected to crude oil discovery not also perform such a crucial step as sealing the underground portion of its well? Why would any well managed company (like BP should be) allow critical safety equipment be installed only to find out that this blow out preventer was grossly defective?

In time there will be answers for these questions. For now, however, one can easily speculate that BP has found that it can make more money using an arrangement of subcontractors. BP has found that separating the liability should protect BP from catastrophic liability risk (for a situation just like the one unfolding right now). In short, this disaster has been just waiting to happen for financial reasons.

In time, the investigation will fall on the role Government played, or should have played. You can go to the bank that Congress will beat its chests and proclaim that the regulatory agencies did not do their jobs. These agencies will respond that they need new powers to prevent a reoccurrence which they could not have foreseen. After much fuss, new rules will be established and everyone will go back to sleep.

Any investigation worth its salt should lay part of the blame squarely on the American public. The public needs to recognize that there are legitimate roles for government, and regulating deep water drilling clear is such a role. Government is the cop on the beat that see that those drilling are doing it according to the best safety standards available. These safety standards are meant to protect the rest of us while also helping to protect BP’s worker.

The real message of the Gulf Disaster is that those who cry that “government is too big” or “government gets in the way of business” need to sharpen their rhetoric and be much more specific. What specifically is government doing to impede specifically which businesses? You can rest assured of more disasters like the Gulf one as long as we cheer these who proclaim “government is the problem”.