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How the scramble for profit wrecked the Gulf

June 16, 2010

The Obama administration is promising to crack down on BP, but future catastrophes are certain because of the nature of a system that prioritizes profit over the planet.

June 16, 2010

WITH OIL still gushing into the Gulf of Mexico, each new day brings fresh evidence of the reckless incompetence and arrogance of oil giant BP–and how the relentless drive for profit at the heart of the capitalist system poses a dire threat to the planet.

BP’s public relations campaign to deflect blame for the Deepwater Horizon catastrophe is failing as badly as the safety mechanisms on the rig. Documents emerging in the press and out of congressional testimony prove beyond doubt that the company–one of the most profitable in the world–knew about and ignored safety concerns about the Deepwater Horizon well, cutting corners and skipping safeguards to maximize profits.

Among the most recent evidence to emerge: According to e-mails released by the House Energy and Commerce Committee, BP decided to sacrifice safety measures at several key points, just days prior to the April 20 explosion on the rig. In one e-mail sent five days before, engineer Brian Morel called the Deepwater Horizon a “nightmare well.” In another, BP official Brett Cocales responded to advice from Halliburton for additional precautions: “But, who cares, it’s done, end of story, will probably be fine.”

Now, the Obama administration is taking action against BP. The president made a nationally televised speech last night, and the BP chairman was summoned to the Oval Office the next day. The Justice Department is opening a criminal investigation into the explosion that killed 11 workers and set off the spill.

BP should be held accountable, and if Obama uses the weight of public opinion to announce that he’ll make the oil giant pay for wrecking the Gulf of Mexico and killing 11 workers, so much the better. (Better still would be if any BP executives and their Halliburton and Transocean counterparts are jailed, or at least hit with fines for their crimes).

But the latest flurry of words and action don’t change the fact that the Obama administration, like every administration before it, let BP and other oil companies get away with far too much for far too long.

And that should teach us a lesson about governments under capitalism: They aren’t watchdogs holding business interests accountable. Instead, they serve those interests in order to protect corporate profits and power.

According to Tim Dickinson’s Rolling Stone investigative article, titled “The Spill, the Scandal and the President”:

Like the attacks by al-Qaeda, the disaster in the Gulf was preceded by ample warnings–yet the administration had ignored them.

Instead of cracking down on [the Interior Department’s Minerals Management Service], as he had vowed to do even before taking office, Obama left in place many of the top officials who oversaw the agency’s culture of corruption. He permitted it to rubber-stamp dangerous drilling operations by BP–a firm with the worst safety record of any oil company–with virtually no environmental safeguards, using industry-friendly regulations drafted during the Bush years. He calibrated his response to the Gulf spill based on flawed and misleading estimates from BP–and then deployed his top aides to lowball the flow rate at a laughable 5,000 barrels a day, long after the best science made clear this catastrophe would eclipse the Exxon Valdez.

Then there’s the question of why the government let the company try to fix the disaster. “The effect of leaving BP in charge of capping the well, says a scientist involved in the government side of the effort, has been ‘like a drunk driver getting into a car wreck and then helping the police with the accident investigation,'” Dickenson wrote.

Beyond the specific oversight failures at Deepwater Horizon, the Obama administration has allowed a wider problem to remain unconfronted–BP’s rig was one of a growing number of deep-sea oil wells sunk in the environmentally fragile waters of the Gulf of Mexico at a depth of a mile or more. These wells are automatically at a higher risk for a catastrophic spill. As Dickinson notes:

In May 2000…an MMS research document developed with deepwater drillers–including the company then known as BP Amoco–warned that [a spill at a deepwater well] could spell the end for offshore operations. The industry could “ill afford a deepwater blowout,” the document cautions, adding that “no single company has the solution” to such a catastrophe. “The real test will come if a deepwater blowout occurs.”

Now the test is here, and both BP and the government failed it.

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BP MAY yet face some punishment if the political leaders of both parties are to be believed. But don’t count on it. While BP executives are crying about how much money the company is losing and its plummeting stock price, if history is any guide, BP will only pay a fraction of what it should.

That’s why Citigroup analyst Mark Fletcher, for example, told Reuters that BP stock is a good buy right now, because stockholders’ reactions seem “disproportionate to the likely costs to the company, even assuming damages can be claimed.”

That’s right–that last part isn’t a typo. Many industry and Wall Street insiders are already lining up to place financial bets that BP won’t pay any pay damages at all. After all, there’s precedent: The Exxon Valdez disaster in 1989. As’sSharon Smith wrote:

Nearly 33,000 Alaskans, including fishery workers who lost their jobs when cannery plants closed and Native Alaskan villagers dependent on wildlife for subsistence won a lawsuit against Exxon in 1994–and a jury awarded $287 million to compensate for immediate economic losses and $5 billion in punitive damages for the company’s “reckless” behavior.

But the company had no intention of paying a penny in punitive compensation. Its team of spin doctors spared no expense in preparing for a legal battle from the first days of the disaster.

Those damages were, in fact, reduced radically on appeal. Exxon agreed last year to pay less than $1 billion, including interest.

Even if BP is forced to pay something, says Fletcher, it likely will do just fine in the long run. “A potential cost figure of circa $700 million gross or $450 million net to BP (based on 65 percent interest) seems reasonable. This would represent circa 2 percent of this year’s earnings,” Fletcher said.

Two percent of a single year’s earnings for wrecking the Gulf of Mexico isn’t even a slap on the wrist–but it’s par for the course when it comes to holding companies responsible for the environmental damage they do.

Meanwhile, the New York Times’ Andrew Ross Sorkin suggested an even cheaper route for BP shareholders:

The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees)…

Shell and Exxon Mobil are both said to be licking their chops. And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup–and potentially billions of dollars in legal claims–into a separate corporate entity.

Such talk begs the question: Why shouldn’t BP, a corporation that raked in more than $16 billion in profits last year, face a much more severe penalty than the “compensation fund” that Barack Obama called for in his speech. Why shouldn’t the federal government seize BP’s U.S. holdings and put them to use immediately, cleaning up the spill and helping those who have been put out of business or lost loved ones.

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BP’s CORPORATE campaign since 2000 has been centered around the slogan “Beyond Petroleum”–as if the company was taking the lead in moving away from oil toward new, environmentally friendly technologies. The catastrophe in the Gulf should dispel once and for all that there can be a safe, responsible and green oil industry.

No one at BP put real effort into a comprehensive plan to clean up after a catastrophic spill for one reason: It didn’t fit in with BP’s plans for maximizing profits. That kind of short-sighted decision is made millions of times a year, in every part of the capitalist economy–because the logic of the free market sees the natural world only as something to be exploited for profit.

If a company like BP were seized and put under real democratic control–not bound by the interests of a few executives and corporate shareholders poised to rake in the most money from its recklessness–the cost-cutting shortcuts that led to the Gulf spill would be eliminated. But beyond that, the corporation’s vast wealth and resources would be devoted to developing and implementing alternative energy technologies on a large scale.

In other words, the only way for BP to really be “beyond petroleum” is if it–and the rest of the energy industry–was controlled and run by ordinary people in the interests of all.

But that won’t happen without a radical transformation–not only of the energy industry.

Right now, there is no real alternative to oil. It drives the vast bulk of industry, not to mention the military. Until that changes, the need for oil will drive the U.S. government to look the other way as corporate polluters like BP do lasting harm to the environment, whether at home or abroad.

The answer can’t be found in individuals trying to swear off Big Oil–a feat that simply isn’t a possible for the vast majority of working people, and possibly for anyone. And as Seth Borenstein wrote on

Ready to park the car and take up bike-riding or walking? Well, your bike and your sneakers have petroleum products in them. And sure, you can curb energy use by shutting off the AC, but the electric fans you switch to have plastic from oil and gas in them. And the insulation to keep your home cool, also started as oil and gas…You can’t even escape petroleum products with a nice cool fast-food milkshake–which probably has a petrochemical-based thickener. Oil is everywhere.

The oil-based economy is highly profitable. As author Paul Street wrote:

Like so much else in today’s world economic system, the BP disaster is yet another case of the forces of production gone wild and deadly because of their captivity to and perversion by the profit system’s amoral and sociopathic imperatives. It’s nothing new. Again and again since Marx and other radical enemies of capitalism wrote, we have seen the profit imperative yield the ugly fruit of ecological catastrophe and a constant assault on the physical health of human beings and other living things.

Ultimately, stopping environmental catastrophes like the Gulf oil spill for good will require a radical restructuring of the system we live in–and the building of a new world, where profits no longer come before human needs, and threats to the environment are no longer shunted aside.


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