RDN and the FT: on BP
On 11 May 2010, the FT printed a letter of mine (reprinted below) on the 20 April 2010 BP Gulf of Mexico spill. Arguably, it was far too early for intelligent opinion to have formed. But – contrariwise – I precisely wanted to suggest that it was too early to come to judgement: that historically oil spills had seldom turned out as journalism had predicted in the excitement immediately following the event. But was I right?
Here’s the letter ( and below my further thoughts):
From Mr Richard D. North.
Sir, Steady the Buffs! It is not all that useful for the Financial Times to pile in with bog-standard media analysis of what may come to be called the Deepwater Horizon, or Transocean, or Macondo, or even the Halliburton spill, as in “A spreading stain” (Analysis, May 7). Behind the rhetoric and the graphic use of BP’s silly “Beyond Petroleum” logo, there is little chance of this disaster “transforming both the company and the industry”.
As your editorial of the same day reminded us, the US administration needs all sorts of oil exploration to proceed. Moreover, David Rothkopf was clearly right that “a boot on the throat is no way to do business”.
It is worth additionally stressing now that regulators can’t wash their hands of industry’s failings. They have signed-off on industry’s disaster assessment and management plans. Catastrophes are a good moment to avoid the blame game and to stress that we’re all in the risk business together. I feel for the unfortunate BP in this crisis and I think it is worth remembering that major oil corporations have, rightly, thrived in spite of very serious blows to their reputations, deserved and not. Shell endured Brent Spar and a long-running problem in the Niger delta. Exxon had its Valdez horror. BP, as is constantly in our minds now, has had difficulties in Alaska and Texas. It is important to remember that investment in companies often survives very bad news.
Richard D. North,
Institute of Economic Affairs,
London SW1, UK
Once the letter was published I was anxious to a degree. I devoured every report I could find on the ecological, economic, corporate, legal, cultural and political dimensions of the spill. Would this be different to all previous Big Oil dramas in Alaska, Nigeria, the English Channel? Would it transform BP or the oil industry? I felt I had skin in the game. Or was it that “BP” would be found engraved on my heart?
Several years on, when it is clearly time for a considered opinion, I want to be both bold and tentative. I think it is fair to say that President Obama initially and importantly played an anti-British card and that BP’s being locked-out of fresh Gulf exploration may in part be a fall-out from that. The ecological impacts of the spill are roughly in line with previous spills: exaggerated by those whose agenda lies that way, and (in this case) slight compared with historic insults. The oil industry may have been chastened, and rightly, by the accident. But it thrives, because it satisfies basic wants and needs, and does so pretty responsibly, as it always has though with room for constant improvement.
How much has BP suffered? This is tough to call, since BP’s previous accident record in the States meant that it was vulnerable to any further failures. But the greater difficulty is that BP’s corporate vulnerability includes, and is confounded by, its travails in Russia.
It is worth noting that BP is still at work in the Gulf, and remains an important oil major, not least in the States.
So. BP suffered from this accident more than other companies had from previous ones. This extra pain was both deserved and undeserved. But the damage was not terminal to the firm. The industry as a whole was only marginally affected.
My larger point – that regulators should stand by the regulated and are often as much to blame for failures – remains important, to my mind. I am not at all clear whether the regulatory regime in the States has been improved by BP’s spill and its aftermath. I’ll try to look into that further.
But, more or less, my letter was worth writing.