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It is absolutely in BP's and Transocean's interests for this well to explode and people to die. That's my point. Avoiding accidents by drilling more safely and
by seldo 16y ago
It is absolutely in BP's and Transocean's interests for this well to explode and people to die. That's my point.
Avoiding accidents by drilling more safely and expensively is not in the interests of BP and Transocean; it makes more sense for them to be risky, gamble 50 times on other wells, make 10x more than they would if they were doing it more safely, and use those profits to cover this one unlucky time.
Forcing them to do it safely even though this makes the well 2x, 5x or 10x less profitable is the purpose of government regulation. In the case of the US oil industry, the regulator is corrupt, completely in thrall to the industry with no accountability.
Hence, the solution is not about pricing risk -- BP have already done that, and this is the logical result. The solution is a regulatory one, which means a political decision.
- msmith 16y agoCan you cite the source that leads you to believe that BP stands to make 10x more profit by running a risky drilling operation? I find it hard to believe.
- seldo 16y agoMy numbers were for illustration. It doesn't need to be 10x more profitable, it just needs to be any degree more profitable and the unlucky event sufficiently rare that the profit of the successful wells outweighs the costs of the failure (also keep in mind that oil companies drill many, many unsuccessful wells, so a marginal increase in the cost of drilling an exploratory well is significantly magnified). Despite the costs of cleanup, we're not anywhere near the point where it makes sense for them to change their practices. BP made $4bn in profit last year, and current cleanup costs have yet to hit $1bn. They can get a lot, lot higher before they outweigh the profits of years of risky drilling.
- richardw 16y agoWhat, and risk being shut out of the US market indefinitely, for the same political reasons? Which pol is going to defend them now? They've just lost all the money they spent on those full-page "BP does lots for the environment" adverts. Between the bad PR, increased risk of regulation and chance of being shut out of the market, this is absolutely more expensive than running a few extra tests.
- mattmcknight 16y agoFrankly, that's some bad math. BP just lost 3-4 years of net profit. You could talk about management interests versus shareholder interests being misaligned, but this event is not in shareholder interest. Also, I don't know where you get your "10x more" profitably number, but I have a feeling you made it up. There is new information about the risk- new to the regulators, new to the companies. We don't even know what the best mitigation approach is. The regulatory structure will follow what works and is cost effective. If the risk is too high, wells of this type will not be built until a better approach is found. Regulatory decisions are not political- not about power. They are ultimately bureaucratic.