It’s now pretty clear that BP, Transocean, Halliburton and their government regulator could have done much more to minimize deep well drilling risks in the Gulf.
Despite known blow-out risks from the pressure, temperature, and underground forces associated with deep well drilling, BP had scoffed at risks of a major spill. BP also chose to avoid the expense of installing a failsafe “acoustic” device for its 18,000-foot deep well.
Likewise, the Department of Interior’s Minerals Management Service (MMS) that regulates off-shore drilling provided loose oversight. Anderson Cooper reported MMS was in bed, even literally, with big oil. Bowing to political pressure, MMS also chose not to require acoustic devices (as Brazil and Norway do), saying they “tend to be very costly.”
How familiar this story sounds.
Despite significant risks surrounding collateralized debt obligations and derivatives, big banks, the Federal Reserve, and the Securities and Exchange Commission failed to put safeguards in place that would have prevented the financial crisis.
The consequences of both sets of ill-advised business decisions weigh heavily upon us today, especially our Gulf Coast friends.
While the fault clearly lies with the greed of a few big businesses abetted by the negligence of federal regulators, all businesses will suffer if the result is oppressive government regulation.
Don’t get me wrong, government has a vital role to protect the public from significant risks. Numerous incidents have shown government oversight is necessary to protect our food supply, provide automobile and airline safety, ensure safe prescription drugs, and more.
At the same time, business, the engine of prosperity in our free market system, must be sufficiently unencumbered to produce and sell goods, deliver services, create jobs, and, thereby, create and distribute wealth.
Ideally, a proper balance should exist between the two, with government encouraging business activity and providing just enough regulation to keep business in-line and major risks under control, and with business innovating, expanding, and producing while prudently managing risks.
Both sides have a responsibility to achieve and maintain this balance.
Such balance does not occur naturally. Rather, it results from a constant tug-of-war among special interests and government.
Business and its advocates seek to minimize regulations and their inherent costs. Consumer and environmental advocates constantly seek stronger regulations. Labor wants its say. Local, state, and national government agencies have varied interests.
Like democracy, the process isn’t pretty, but most of the time it operates in reasonable balance. It fails when those in charge let it fail through negligence, incompetency, or greed.
Deep off-shore drilling, and financial derivative trading, should…and must…continue since they are vital elements of our modern economy, but only with the appropriate reliable, government imposed safeguards.
Risky business as usual cannot continue.