Risk and Doing Something

I am beginning to believe in the Onion headline: “Black Man Takes Nation’s Worst Job.”

Every pundit — right, left, center, on the moon, whatever — is howling for Obama and the Federal Government to do something about the BP Oil Spill. No one has any suggestions what that “something” is, only “something” must be done and it must be done “now.” Would a nice speech plug the hole? Some words keep the horrible pictures of oil covered birds from getting all over the Internet, livelihoods destroyed, and entire states wiped out? We elected a guy who can keep his cool in the face of adversity and here he is, keeping his cool in the face of massive adversity, and we’re flipping out because he is keeping his cool in the face of adversity.

I asked myself the honest question: “What should the Federal Government do?” That lead to the more interesting question: “How did we get here?” And I came up with my friend, the bullet points.

How We Got Here:

1. We are approaching a condition called Peak Oil. The easy to reach oil fields are tapped out so oil companies, to keep up with the insatiable demand for dead plant pumped out of the ground in the form of fuel and profits, must venture further and further afield.

2. While venturing further afield, oil companies must take on great amount of risk.*

3. Mitigating risk is extremely expensive. It requires stricter regulation, third party validation and audits, expensive engineering solutions to ensure safety. Knowing a little bit about Six Sigma is helpful to understanding what BP was attempting to avoid. Mitigating great amounts of risk to drill safely costs great amounts of money.

4. Risk analysis, risk mitigation, business continuity and disaster recovery are all basic business processes that BP should have undertaken, and likely did, but decided instead to socialize the risk to privatize the profits.** They had two major disasters prior to this one: a major Alaska oil spill and a Texas refinery explosion. Neither caused the slightest hardship for BP, so “big dangerous risks” meant “the Government will cover the costs of cleanup so we’re good.”

5. Third party audit and validation through licensing is one of the few ways to force dirty companies to be good citizens. Otherwise, see #3, above. Mitigating risk meeting requirements is very expensive.

6. It was cheaper, during the Bush Administration and into the Obama Administration, to simply bribe auditors and staff Interior’s audit and compliance department with lobbyists than it was to mitigate the risk on the rigs.

7. Certainly it was on the Obama Administration’s list to audit and reform the Department of Interior, but it was somewhere below the Euro imploding, the Financial Crisis, 10% unemployment, North Korea, Iran… he is not a bored man.

Big risks + no risk mitigation + cutting corners + socialized penalty for failure + no third party oversight == BOOM.

This brings us to “the Federal Government needs to DO SOMETHING.” So far the Government has:

1. Provided extensive financial assistance. (This was reported in the Economist at length but not in the US papers, which was weird.)
2. Deployed the Coast Guard.
3. Deployed the Navy.
4. Fired people in the Department of Interior.
5. Provided all the scientific and engineering logistic support they can.
6. Opened up civil and criminal cases against BP which may or may not be helpful.

The Federal Government does not have petroleum engineers or the equipment to go undersea and plug the leak. Nor do they own the rig, the equipment, or the wreck on the bottom of the Gulf of Mexico. They must rely on BP, who has the equipment on the scene, to cap the leak before the Federal Government can unleash assistance to start the unbelievably massive cleanup. The Government can make some suggestions and keep people away while BP tries to work, but reality is that they cannot actually do anything.

And this is deeply frustrating because BP is incompetent.

This brings us to: What should Obama Do Now? I cannot see anything he can do right now. Walking along the Louisiana Coast looking frowny might make for some okay media coverage but the reality is, until the well is capped and the oil stops spewing, he can not do anything except provide some optics.

What do I think the Government should do once the well is capped and cleanup has begun? Here are my suggestions, and take them or leave them, but this is all I have:

1. Reform the Department of Interior from top-down. Fund and mandate all third party government regulations and audits. Put the screws down on licensing. Force the oil companies to pay to mitigate risk.

2. Pull BP US’s leases until they go through a complete safety audit. Yes, it will spike oil prices but we can no longer afford to socialize the end result of ignored risk. Force the company to have a hand their own risk and force them to pay enormous financial penalties.

3. Start a Manhatten Project/Apollo Space Program for getting off oil. Make it the #1 National Priority. Make it a point of National Pride. Run commercials. Run op eds. Show dead birds 24/7 on TV. Run anything to get the public turned in that direction. If Congress cannot figure out a way to pass funding, find it in the already allocated Defense Budget. God knows, that Defense Budget is mammoth. Do anything, anything at all, for funding a massive initiative to get us away from the death by dead plants. And do it now. We should have done it 10 years ago.

This is it. This is the last great warning we will get. We must change.

* BP keeps using this excuse that this enormous risk was “too remote to be quantifiable.” This is bullshit.
** Sound familiar? There’s a trend…