May 14, 2010

Thoughts after catastrophe

As I write this ten days after it exploded and sank, the Deep Water Horizon calamity, because that is exactly what it is, will be a game changer- and not just for the oil industry. We in commercial shipping may distance ourselves by making a distinction between an oil rig and a ship, but the average Joe does not, and neither will regulators and governments that look aghast at the devastation that a single marine accident has caused.

The statistics are staggering. The Horizon will likely rival Exxon Valdez on the disaster scale by the time this appears in print; the present slick is at 9 million and growing at the rate of 5000 to 25000 barrels of oil a day; at one stage it tripled in size within twenty-four hours. Worse, this will probably ravage much larger areas off the US coast than the Valdez incident thanks to geography, the Gulf Stream and the Loop Current. Louisiana accounts for a third of domestic seafood produce in the United States, and this 1.8 billion US dollar industry now threatens to disappear almost overnight. Scientists are warning that the coastline of Florida may be at risk too. Amongst the other casualties of this devastation will be bottlenose dolphins, alligators, endangered turtles and hundreds of bird species. The impact of this single incident will be felt for years- even decades.

“I can’t imagine we’re not going to have some mass casualties,” says Michael Parr of the American Bird Conservancy. He is right; there is no sign that the leak will be plugged anytime soon, what with robot underwater craft working 5000 feet underground with no real solution in hand. The financial costs of the cleanup are likely to be equally staggering. BP, the operator of the rig, has seen 20 billion dollars of its market-cap wiped out since the incident; cleanup costs obviously not included here.

Political finger pointing in the US is well underway, although nobody is clean enough to do that. There is big money involved; the lease for a deepwater rig runs to a million dollars a day, give or take. President Obama is in the hot seat, having proposed increased drilling off the US Atlantic coast just weeks ago. (Republicans are also calling the Horizon Obama’s Katrina, though that is a little unfair; Katrina was not creating mayhem at the bottom of the ocean floor). Not that the Republicans have a cleaner history, with Sarah Palin’s “Drill, Baby, Drill” slogan for the industry fresh in people’s minds- and which many say should now read ‘Spill, Baby, Spill.”

The Deep Water Horizon episode will almost certainly end with much tougher US safety and oil spill response regulation, and therefore increased costs, for the oil industry. Commercial shipping, it’s cousin, won’t escape easily either.

Leaving the US for awhile, lest we think this is just their problem, I read recently that Nigeria has a couple of thousand incidents in its oilfields annually; many are, let us say, not minor. I am surprised that Saddam Hussein’s destruction of the oilfields and the estimated 520 million gallons spilled into the Persian Gulf did not result in a greater uproar; that was a deliberate act. In any case, much of the developing world is chasing oil at sea, and much of it gives, compared to the US, much lower priority and funding to the possibilities of such catastrophe, or resources required post accident. I shudder to think what would happen if a similar incident were to happen on the Indian coast; this is a country that ignores ships sinking and leaking oil in ecologically sensitive areas on its coastline. Orissa is a particular case in point.

Finally, my soapbox take on all this:
Oil and shipping companies get a bad rep, some of it undeserved.

More than 90percent of all goods-including oil- is carried by sea.

Recent accidents that could have been major include the Cosco Busan in Frisco and the Shen Neng I in the Great Barrier Reef (the Aussies did a slap up job there, with luck assisting). There have been at least five accidents, to my knowledge, on the Indian coast in the last couple of years where little has been done to even understand the risks, leave alone fix them. Two or three of these have been off Orissa, and have endangered the coastline, sanctuaries and endangered species (like the Olive Ridley turtles), but nobody really cares. We don’t have the equipment. We don’t have the people. Worst of all, we don’t have the will.

Ships and oil platforms are getting bigger and more numerous. Operators of both are run by accountants with calculators, who override professionals, though in reality both businesses require highly trained people and expensive equipment for safety.

Governments around the world, including the US, are just not geared to deal with the scale of such disasters. Hell, they cannot even deal effectively with a twenty year old issue that has been found to cause major accidents- fatigue at sea- because of the same accountants.

So, unless the world a) changes consumption patterns and/or b) is willing to pay much more for everything (which will happen soon enough- since every marine accident brings new regulation and more stringent safety features and so raises costs- this one will, too), future disasters will be more in number and bigger. Simple statistics of probability, really.

Meanwhile, part of the problem is you and I, as consumers.