Sunday, May 23, 2010

How Should We Think About the BP Oil Spill?

One of the most mind-jarring images of the current disaster in the Gulf, besides the thousands of dead wildlife in the water so far, has been the sight of lawyers and environmental activists getting out of their monster Escalades or Yukon SUVs in Louisiana to ‘investigate the damage caused by that awful oil company, BP America’.

We wonder if we would even need any oil imports from Saudi Arabia or off-shore drilling if everyone drove Priuses or rode bicycles to work rather than these gas-guzzling SUVs. So if you do one or both, you should be proud of yourself for 'walking the talk' of being environmentally-conscious and lowering our dependence on foreign oil.

A treehugger friend of ours from way back, who works in the solar division of a major company by the way, told us that with all of the money that will eventually be paid by BP and the federal government to clean this enormous mess up in the Gulf, plus other cleanups over the years, we probably could have outfitted every house in the United States with solar panels by now. This would have effectively heated everyone’s water, provided a significant share of their annual electricity needs and/or offset a large part of their annual heating and cooling costs.

Think about how much that would reduce our dependence on foreign oil and or off-shore drilling going forward.

We can point our fingers all day long at all of the 'dirty corporations' or 'foreigners' but the circle keeps coming back to us Americans, the most voracious consumers of natural and manufactured resources the world has ever known. We are like swarms of locusts when you really think about it.

Should BP bear a lot of the burden of the cost of this oil spill cleanup?  Sure.  Apparently they were not fully prepared to handle this explosion and to the extent they are culpable and liable for the accident, they should be held accountable like any other person or corporation in America.

But isn’t there some responsibility the entire nation should accept for the cleanup?  We say we want to ‘lower our dependence on foreign oil’, especially since now we know that the Saudi government has been at least passive supporters of terrorist activities against the United States since before 9/11, so off-shore drilling is one logical alternative we have to pursue.

Americans most definitely want to keep prices for gas and oil ‘low’ by any means necessary. By the world’s standards, we are by far one of the lowest-price nations for both petroleum products.  We remember the days of the first ‘energy crisis’ in the early 1970’s when we had to line up at gas stations on ‘odd/even’ days (don’t ask!) in order to fill our energy-inefficient Mustang and Camaro gas tanks up so we could go to school or just cruise around town with the top down.

It cost an 'unfathomable' $1.00/gallon then.  By any sort of inflation-adjusted basis now 40 years later, gasoline for our cars should cost a modest $5.46/gallon today just due to inflation.  For some reason, the cost of gasoline has dropped relative to inflation almost like computer prices have dropped over that time span. Why is that?

Let’s think about the cost of this cleanup:
  1. If BP pays for the entire cleanup, it could bankrupt the company and take another competitor out of the market that otherwise would help keep prices down.
  2. If BP pays for the entire cost, do you think they will or they will not pass along all of that cost in the form of higher prices over any length of time it takes to fully recover or amortize the cost of the cleanup?
  3. Is there an obligation of the federal government, on behalf of its citizens who clamor for lower gas prices harder than any other issue, including national health care, to help pay for this cleanup since we have benefited from oil being pumped out of the Gulf of Mexico for lo these many years?
  4. Are man-made disasters really any different than natural disasters like Katrina or the volcano in Iceland blowing up?  A disaster that affects you is a disaster regardless of how it happens.

One of the things that irritated us the most when we were serving on the Budget Committee was when Congress would pass a ‘supplemental appropriations bill’ to pay for the cleanup and repair of any disaster immediately afterwards.

Supplemental appropriations have become another way to subvert fiscal discipline and restraint under the guise of ‘natural disasters’ and ‘national emergencies’. These bills are the white sandwich bread upon which additional earmarks for special projects are piled on by members of Congress for their favorite programs, oftentimes hundreds or thousands of miles away from the actual site of the disaster.

Our view is that the federal government should start accounting for disaster cleanups on a forward-looking basis in the annual budgets by allocating, let’s say, $20 billion in a ‘clean-up’ fund or whatever has been the running average for annual disaster cleanups for the past 20 years.

Sure, that might take away funding from some other parts of the budget but isn’t having a contingency fund for such disasters really much more important than having any funds allocated to any more Lawrence Welk museums or “Bridges to Nowhere”?

At least then, we would have the resources already set aside to deal with catastrophes such as Katrina and now the BP Oil Spill.  Haven't we learned enough from history that we are always going to have unexpected events like these?


  1. I really like the finish of the article. I think touting how much oil we consume without also admitting what we do with it is somewhat shortchanging us. It is not as though we only burn gas in big SUVs. Oil is used for all manner of industries which make profits which are then used for foreign aid (which ulitmately does nothing good for us) and despite the negative press we are still a big manufacturing nation. The point that I really take issue with is the assertion that solar panels for our homes would do much of ANYTHING to slow our use of oil. We get very very very little electricity from the burning of oil. It is predominately Coal, then Nuclear, then Hydroelectric. It has become part of our national conscience that wind power and solar power will reduce our dependance on oil and that is simply not true according to any information I have ever seen on energy production.

  2. But as I said, the idea of actually budgeting for disasters is a very rational idea. Businesses budget for risk, why not countries?

  3. gotcha...I have no idea just how much electricity we will ever replace with solar versus carbon-produced electricity. My friend might have been blue-skying that analogy just a tad.

    but he does have a point that every solar panel we put up, it does reduce our dependence on some form of carbon energy source, (except nuclear)

    and the real point is just when are we going to wean ourselves off of foreign oil which exposes us to foreign intervention of all sorts and the threat of terrorism and Middle Eastern wars? and then we complain when an off-shore drill site explodes and leaks thousands of barrels of oil daily and we act like our consumption of oil and 'demand' for it to be cheap has nothing to do with it?

    that is disingenuous to a factor of 10 in my book...


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