Reflections on the Deepwater Horizon Disaster

May 26, 2010 | by | Topic: Economics & Political SystemsPrint Print

The explosion that sank British Petroleum’s Deepwater Horizon oil-drilling vessel/platform in the Gulf of Mexico in April was an unmitigated disaster. The accident killed 11 workers and has caused massive environmental damage, the full extent of which may not become known for months or years.

Here are some thoughts on this horrible event:

1) The deaths of 11 workers drilling for oil—less than three weeks after the deaths of 29 West Virginia coal miners—serve as a vivid reminder of the dangers faced by those who toil to supply the raw energy upon which our society depends. Most of us take for granted these vital contributors to our economic life. As one who never knew his father due to an oil-field accident long ago, I tend to view these folks as unrecognized heroes. Thank you to all who are doing this essential, dangerous work; may God comfort all who have lost loved ones in this endeavor.

2) The technologies that have been developed to extract fossil fuels from the earth are engineering marvels. Some drilling vessels in the Gulf are nearly the size of World War II-era aircraft carriers. There have been over 14,000 wells drilled in at least 700 feet of water with a superb overall safety record, including no oil spills in the Gulf despite the merciless battering inflicted by Hurricane Katrina. (Whether drilling these wells is safe enough to be permitted is a separate question that will be revisited below.) Drilling for oil in oceans five miles deep, into deposits where the temperature can reach 900 degrees and the pressure 20,000 pounds per square inch, is a colossal engineering achievement.

3) We must never forget the power of nature. Humans have devised myriad ways of fending off nature’s destructive power, but there will always be times when nature will simply overpower and overwhelm our best efforts. The explosive force that erupted through the ocean floor and destroyed Deepwater Horizon is one emphatic reminder of that awesome might.

4) Was the disaster avoidable? This is the key question. It is very tempting to jump to conclusions, but first we need more fact-finding.

There have been reports that workers saw considerable physical evidence that key parts of the built-in safety mechanisms on Deepwater Horizon had disintegrated. A preliminary congressional memo containing admissions of “mistakes” by BP reinforces the impression that the disaster might have resulted from a faulty decision-making process. If so, then this horrible tragedy will enter business-school literature as perhaps the definitive case of a dysfunctional managerial chain-of-command.

One of the oldest lessons in the book is to avoid being penny-wise and pound-foolish. How tragic and foolish it would be if it turns out that a decision was made to ignore a safety shutdown that would have cost millions, thereby resulting in an accident that surely will cost BP and related corporations billions.

There has been an unconfirmed report that government regulators gave Deepwater Horizon a pass. If so, why?

5) Finally, should we stop drilling for hydrocarbons in such deep waters? The central problem we deal with in environmental economics is whether the costs of an activity outweigh the benefits or vice versa. It isn’t always possible to accurately tabulate costs and benefits, but without a doubt, the environmental and humans costs of the Deepwater Horizon disaster are gargantuan.

I certainly can’t say whether deep-sea oil development should continue. With 20 percent of the oil consumed in the United States coming from the Gulf of Mexico, a complete cessation of drilling there appears to be out of the question. Certainly, though, there will be a re-examination of where drilling will be allowed.

Many people are asking why there is drilling in such deep waters. This is a complex issue with multiple factors to consider, but ironically, environmentalists may be partly responsible.

For decades, environmentalists have striven to thwart the development of domestic supplies of energy. They have blocked oil exploration and development in vast tracts of Alaska, the Rocky Mountain states, and the outer continental shelf under relatively shallow waters along our coasts. Furthermore, environmentalists succeeded in preventing increased usage of another energy source that is economically competitive and ecologically and operationally the safest energy source readily and abundantly available to us—namely, nuclear energy.

If these sources of energy had not been choked off in the name of environmental protection, would energy companies be currently drilling as many higher-cost wells in deep water? Is it not possible that zealous environmentalists have unwittingly driven energy companies to drill for oil in places where perhaps they have no business drilling? Should environmentalists rethink their positions and make their peace with sources of energy that pose less of a threat to the environment than deep-water drilling?

These are important questions for environmentalists, policymakers, and indeed, all of us, to consider.

Mark W. Hendrickson

Mark W. Hendrickson

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.

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