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So who will be allowed to drill, and where?

  • June 18th, 2010

The Economist comments on Obama's harrying of BP, noting that:

"After the macho rhetoric came the demands for cash. Mr Obama decided to “inform” BP that it must put adequate funds to meet all compensation claims into an escrow account beyond its control, although he has no authority to do so. Nancy Pelosi, the speaker of the House of Representatives, instructed it not to pay a dividend until all claims tied to the spill are settled. Her fellow Democrats in Congress are trying to raise BP’s liability retroactively—the sort of move America’s courts rightly frown on."

 I've found distasteful the Republican and Tea Party vitriol against Obama personally. In my experience the left has been more prone to forget that they share much more with their countrymen opponents than what they differ on, and to consider their opponents to be wicked and deserving of no human respect. Now the US right sounds the same. So I've stopped reading most of their stuff.

But the BP saga seems to have revealed in Obama shortsightedness, and lack of the courage to lead wisely.  Instead of responding to the unfair criticism of his "inaction" on the Gulf spill with resignation and moderating comment, he has joined the mob. As the Economist puts it: 

"Mr Obama is not the socialist the right claims he is (see article). He went out of his way, meeting BP executives on June 16th, to insist that he has no interest in undermining the company’s financial stability. But his reaction is cementing business leaders’ impression that he is indifferent to their concerns. If he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so. The collapse in BP’s share price suggests that he has convinced the markets that he is an American version of Vladimir Putin, willing to harry firms into doing his bidding."

What does this precedent mean for all the US firms drilling around the world, some of whom will inevitably spill oil?  How will Obama resist confiscation by corrupt or opportunist foreign governments of the assets of the firms with US connections? The US (and Europe and the rest of the world without oil) is depending on risk accepting explorers to open up new fields and wells to feed the West's cars and planes and home heating and airconditioning.

BP is big enough to survive this disaster. But what if the well had been commissioned by one of the smaller would-be explorers? The message from Obama's conduct is that drilling should be permitted only to those who have enough to loot in full compensation for a serious spill. Perhaps there will be insurance for that risk. It will be expensive, and even more tempting for an unprincipled government to loot for an "escrow fund". Could the end result be that only the big sisters, and sovereign oil firms can afford the risks of sea drilling?  

Another of the US government's aims has been to avoid the defense security risks inherent where reserves are increasingly owned and controlled by state companies under the direction of potentially hostile governments. A world in which smaller explorers have been squeezed out would not seem to serve that purpose.

A spill in the South China sea, or Indonesia, or any one of thousands of sites where firms with US links are drilling could be when the baying crowd in the US finally realise what their President has done to their interests, by putting temporary political recovery ahead of sober principle.

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