Just one more look back, please, lest we forget. The Deepwater Horizon disaster in the Gulf of Mexico provides a telling example of how to calculate the true cost of "progress." As economists join with scientists, we are moving from observation and study to predictable measurement and advance calculation of the true value of natural resources -- the cost of their development, of their loss, of the mitigation and adaptation required by their consequence, and of their implementation without first taking into consideration the broader and deeper financial implications for the community, immediately and downstream.
Historically, the conventional corporate argument, typically made to local communities, regulators, and state and federal legislators, has been that the presence of an offshore drilling industry be valued in terms of jobs created, taxes and royalties paid, and value added to the overall financial health of the local, national, and indeed global economy. Given the quarterly financial reports of the oil companies, this evaluation adds up to substantial profit. But so much is left out of the calculation.
For example, we tend to forget that the natural resources within any national 200-mile limit are owned by the public and that, as such, government is obliged to exploit that capacity for the national good. In many cases, the legislation enabling the licensing of these resources requires royalty payment frequently designated to restricted funds for specific purposes: scientific research, education, environmental protection or historic preservation. While that may be true on paper, those royalties most often end up not in support of those designated purposes, but in the general fund.
Moreover, it is evident that the royalties collected are only a fraction of the market value of those resources, and the profits generated, even after all the substantial costs of administration, exploration, drilling, transportation, refining, distribution, and conversion into innumerable oil-based products, when distributed to the shareholders, represent a not so visible but very real transfer of value from owners to investors, from public sector to private sector, from the many to the few, in not necessarily equitable percentage. Most of us are left out, or in to pay yet again at the gas pump.
In addition, government provides enormous public subsidy to the oil industry in the form of incentives and tax credits for exploration and research, technology development, depreciation, and many, many other legislative amendments, regulatory adjustments, and management decisions along the way made for the benefit of the industry. And, of course, there is the continuing presence of politicians and government officials, chosen for their influence, working as lobbyists or sitting on the boards of these companies and expected to avoid direct and indirect conflicts of interest.
What, then, is the true value of an oil well drilled a mile down offshore in a unique ecological zone subject to multiple uses? Is it simply the cost of the well or the price of the product? The real calculation must include all the ancillary expense and revenue, and the cost of their loss. When you begin to add up what the public has paid for DeepWater Horizon versus what has been gained -- and when you add the hidden subsidy -- and when you add the cost of dealing with the immediate consequence of the disaster -- and when you add the value of loss to the environmental refugees and communities affected -- and when you add the value of damage to the productive ecology and the future revenues lost -- and when you add the value of reparation, mitigation and restoration of lost resources going forward -- and, ironically, when you add collapsed shareholder investment in a wounded international company -- you have a dramatically different equation. From a balance sheet perspective, what in the near term seems profit is in the long term a financial disaster, visualized just a few months ago in the photos of oil slicks, wide and deep, fouled beaches, dead wildlife, destroyed wetlands, unemployed fishermen, bankrupt tourism businesses, depressed local economies, ruined communities -- all now rapidly forgotten, business as usual, as BP moves on to Russia.
Why would anyone invest in this strategy for the future?
Offshore Oil Drilling
maybe because oil has allowed us to live such a healthy (drugs, heat, cook, transportation) and comfortable life. Or maybe so that our Nation can maintain a prosperous GDP / economy
Obama said recently oil was the energy of the past, I wonder what the massive new jet that Boeing just released, will run on. Why would they use such a pass'e type fuel?
We currently have NO replacement for oil. Until we do, lets not cut our noses off.
No one reasonable is saying that the petroleum based economy will change in any foreseeable future, but most sane people support looking for a way to moderate the negative costs and invest in less expensive alternatives.
Here's why:
http://chart.finance.yahoo.com/z?s=XOM&t=my&q=l&l=on&z=l&p=s&a=v&p=s&lang=en-US®ion=US
So you sell your soul to mine the gold, get a paycheck every two weeks for a few years until the gold is gone and then you pay more over the rest of your life and the lives of future generations to clean up the mess and pay the doctor bills. And the place where you live now looks like Sh*t and all your neighbors are in the same situation, while the folks who got the money live far, far away.
Past civilizations have self-destructed due to people destroying their environment; Easter Island and Norse Greenland are just two examples: their populations starved to death, or those who could, fled. Humans are doing exactly the same today but on a global scale. In a few short decades humanity will be in big trouble. And there will be nowhere to flee to. But the lie is more pleasant: "It'll be fine".
That's right, keep drilling, keep burning, keep poisoning, nothing bad will happen. As long as you have no conscience...
The Financial Times puts this annual subsidy at $600 billion , worldwide.
So.... What's wrong with this picture? Anyone? Anyone?...
The Obama Adminstration issued a moritorium, under the false pretenses of having been peer reviewed by industry experts, shortly after the spill. After the federal courts ruled the moratorium unconstitutional, the Administration immediately imposed another nigh-identical moratorium (the same Federal judge who ruled the first one invalid is thinking about holding Adminstration officials in contempt of court for that). Although the moratorium is officially gone now, a "Permitorium" is now in place wherein it is impossible to get the necessary permits to actualy begin or resum drilling. It's already cost the Gulf Coast tens of thousands of jobs, and many of the ideled rigs have departed for Brazil (and many more will likely do so in the months ahead). They won't come back for many years, if ever. Further, there is still the possibility of further lawsuits against the US (possibly reaching into the billions of dollar range) for the moratorium/permitorium policies.
When we're chalking up the costs of the accident, you have to factor these in as well. Those unemployed workers are consuming benefits now (uninsurance, welfare programs, etc.), and future lawsuits may well cost the government a whole lot more.
I ask the question, 'have our coasts fully been explored, in terms of drilling'? We need oil. This country is a big oil junky. We have to have our petro-smack. So, as with the legalization of other drugs, bring the 'dealer' right out in the open, there, so everyone can see just what kind of business is really going down, here.
They say that the US only has something like 3% of the world's proven oil reserves. They also say that somehow, oilfields start magically replenishing themselves. Those 'they' people say a lot of stuff, I think, not all of it believable, and since we're talking about for-profit businesses, maybe less and less believable.
I think that if onshore/close-shore drilling is at all feasible, then it should be fully utilized, because an oil spill 1/2 mile off shore is a lot more containable than one out in the middle of the gulf of Mexico.
Finally, what's with that hat and glasses, Ahab?
Thank you for this reminder that the Gulf has not been even a little restored. Out of sight, out of mind, is one of the problems, but the recent article regarding the "Czar" in BP's employ, pinching pennies and delaying payment so that the claims will be further reduced, when they are at long last paid out, is another. We can't hold their feet to the fire if no one lights the match.
There are so many problems on our collective minds today, and unhappily, all caused by the same tier of corporate arrogance. that we are responding like ADD sufferers. Just when one siren is dying down, another starts shrilly blaring, alerting us to the new catastrophe. There is an overload of suffering at the hands of corporate marauders, unhindered by scaled back inspectors. The plague of Attention Deficit Disorder is endemic in our Justice Department, the supposed first responder to all of these crises/crimes.
The people of this country are so emasculated by lost jobs, lost futures, lost homes, that they cannot defend themselves or their rights.
The man's been widely touted - by people on both sides of the isle - as being one of the most responsible dispensers out there. He was head of the 9/11 victims fund, the fund for the Virginia Tech shooting victims, and the compensation for bailed out banks.
At the BP fund, he's been doing a lot of work to get people temporary money and to simultaneously weed out fraud. Yes, weeding out fraud requires paperwork and time, but it has to be addressed if BP is going to give any money to anyone prior to a court case. Note that BP is under no obligation to pay a cent of restitution to anyone until a case has gone through court. With appeals, BP could probably spend almost every litigant into the dirt and force them to take a settlement long before they ever received any money at the direction of the court. Fortunately, they haven't taken that route; so please cut Mr. Feinberg a little slack, since the alternative is the poorhouse for all of the victims.
The EU has done much better in this regard than the US.
F&F.