The Gulf Oil Spill and the Unintended Consequences of Regulation
Rob Long told me a while back that one of the toughest things in Hollywood these days is picking the right villain. In a global market for American movies you don’t want to unnecessarily tick off any potential customers (hold the snarky comments: we all know that conservatives aren’t “potential customers” in the movie biz). One thing everyone seems to agree on is that multinational corporations – heck, even interstellar corporations – are the safe movie villains of the modern age. It is de rigueur to depict corporate-types sneering at vital safety regulations and destroying otter and seal pup habitat for the fun of it, usually while on break from orchestrating a global takeover in the furtherance of moneymaking.
But what about a reality where the villain isn’t flesh-and-blood but the dead hand of bureaucratic processes? A reality where disaster is due in part to employees of a multinational corporation diligently following those earnest, otter-saving rules routinely ignored by their celluloid counterparts?
This may be the case in the Gulf Oil Spill disaster. The Wall Street Journal reports today that in the minutes before the explosion BP engineers successfully used the blowout preventer to regain control of the runaway oil well. However, gas was already rushing towards the surface. Rather than diverting the deadly mixture safely overboard, the crew allowed the jet of combustible gas to come aboard the rig, engulfing the drilling platform, causing the explosion and the spill.
Why wouldn’t the rig operators routinely err on the side of caution and divert potentially deadly flows from an unbalanced well over the side?
Workers had made another fateful decision in the first moments of the blowout: They had directed the gas and drilling fluid coming out of the well through a system on board the rig rather than straight overboard. Normally, that would have been the right decision. Dumping oil-based fluid overboard is a violation of federal law and could have drawn a substantial fine. The system on the rig was designed to capture the fluid and get rid of the gas.
Government regulation isn’t cost-free. Sometimes the unintended consequences contribute to a Great Recession – as with Fannie and Freddie mandating the extension of mortgages to un-creditworthy borrowers – and sometimes a gigantic oil spill.
I can’t wait for the Obamacare and Dodd-Frank financial regulations to really kick in.
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Aug '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
And regulation requiring that drilling not be done close to shore, in shallower water where spills are easier to control, probably contributed to them drilling out so deep in the first place.
Oh, how I wish I could tattoo into some of my friends' brains the reminder that
May '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
When government is limited and local, lawmakers and law enforcers are more apt to consider the spirit of the law, as well as its letters. Acknowledging the spirit of law allows for both corruption and wisdom, but I believe there is a net gain at the local level.
In another thread, someone made a comment that part of the genius of the Constitution is that it is short; the idea being that people shouldn't need long compendiums of rules to know how to live civilly. I agree. One of the most glaring flaws of our modern society is that people are subject to laws too numerous, too complex and too obscure for even the greatest and most knowledgable minds to understand.
Aug '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
Does Rob Long need a movie idea? Here's one: an epidemic threatens the U.S., and there's both a vaccine and a cure, but Americans can't get either because the Health Commissar is Roy Nagin and we all have to wait until he finishes complaining publicly that someone else hasn't done his job for him. Since most movie critics would sympathize with the villain, this is can't-miss!
May '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
US tort law generally adopts "comparative fault", as opposed to the earlier "contributory negligence" get-out-of-jail-free card that was mitigated by the Doctrine Of Last Clear Chance (fault fell on the party who had the last opportunity to prevent the problem, no matter how egregious the conduct of the other party). The Gulf spill was 75% BP's fault, and the feds screwed up first by not reading and enforcing the permits and plans, then by tipping over the rig when fighting the fire, then by not taking expeditious action to mitigate damage after the blow. Worst of all was shutting down the drilling of all the people who did it right.
But you can't absolve BP. They simply did not act responsibly or follow their own rules- it really was "any risk to save a buck": see Popular Mechanics' story. They also did the best work on WTC (debunked the "truthers"), and on Katrina. BP''s record is execrable. Unfortunately, because we who favor markets have to explain how highly visible irresponsible companies are not more common than out-of-sight good ones.
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
In all such accident chains one looks for any means of interrupting the sequence. Despite BP's many boneheaded, indefensible decisions leading to the spill, the explosion and loss of life could have been avoided if the economically sensitive drilling team hadn't feared a "substantial fine" for diverting mud and gas overboard.
It's interesting that people always worry about how they'll look in the wake of taking action to shut down or otherwise delay an important process, assuming that they will still be around to be embarrassed. Averting disaster invites second-guessing after the fact. Hence a tendency towards inertia and groupthink.
BP strikes me as the oil company equivalent of a scud running private pilot long used to flying dangerously until the the foggy evening he buys the farm near the local airport.
May '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
To be fair, drilling is complex and unpredictable, and there is often no definite answer for how to respond to a situation. So I've been told many times over the years by oil industry veterans. I'm reminded of the Mike Rowe speech linked to in another thread. Sometimes real work demands sacrificing safety and other values. Sometimes it requires making choices that are not really good, but less bad. That's life beyond the boardroom.
I'm not trying to absolve BP of anything. It's just something to keep in mind as everyone tries to rake these companies over the coals. I don't trust any account of the disaster completely, and I'm inclined to distrust reports made from industry outsiders.
May '10
Re: The Gulf Oil Spill and the Unintended Consequences of Regulation
Did anyone actually read the Pop Mech artticle? Sometimes we conservatives get so fired up about our reasonable distaste for government that we go off the deep end. Anti-communism was vital- McCarthy was a mindless, drunken jerk. The fact that Joe Rauh and other lefties went nuts over McCarthy doesn't absolve him, nor does the fact that he was a nut absolve the 1940's Communists.
In this case, the reason the vast majority of the US changed tort rules is because the DLCC is a serious moral hazard, enabling idiots such as those who ran BP to take foolish, and wildly unnecessary extra risks (Aaron- far above and beyond the tough environment; in fact, that fact should make someone more careful, not less). Just because the Feds screwed up their response as well- as we would all tend to expect- that does not absolve BP.
George, some butcher messes up a procedure. You go in and fix it as best you can, the patient gets a small bit of scar tissue because you didn't completely debride one area. Should the butcher be home free, and you be sued for malpractice?
Edited on Sep 14, 2010 at 10:44am