A Lot to Lose

The immensity of the unfolding disaster in the Gulf of Mexico is only now beginning to sink in.  Wildly varying estimates show as  much as 200,000 barrels of crude oil a day into the ocean.  We are in an early stage of an unprecedented environmental disaster.

The St. Petersburg Times' Headline of Sunday May 2 says it all: "A Lot to Lose".  Once the oil hits the Gulf Stream is will be dispersed from off the  Louisiana, Mississippi, and Alabama coasts to around Florida, up the U.S. east coast, then across the Atlantic toward Great Britain and Europe.  One can only speculate on the detromental effects on fish, shrimp, birds and shell fish.  We can only hope for the best.

Don't own BP stock? Think this doesn't affect you?  Think again!  Florida's pristine sand beaches, the price of seafood, the birds, the sea turtles will all suffer.  And then there is this: You better believe that everyone who drives will be paying more for gas because of this catastrophe.  Sarah Palin's "drill baby drill" image and Rush Limbaugh's "Eco-Nazi" rants are about to get a long over due dose of reality.

Suddenly the Gulf of Mexico (GOM), one of the two bright spots (the other is North Dakota) in U.S. oil production, has dimmed.  Oil production has been growing in the GOM recently.  Now, with new drilling temporarily halted, that trend may reverse.  New drilling is needed to replace depleting old fields. Caution and additional safety measures, which may or may not work to prevent this type of catastrophy, will drive costs up.

Since the U.S. absolutely needs oil economic considerations will eventually prevail and drilling will continue.  We will  pay for it not only at the pump but in diminished quality of fisheries and beaches.

Who to blame?  BP, who operated  the now sunken rig?  Transocean (RIG) who owns the rig? Cameron (CAM) who apparently made the malfunctioning blow out protectors?   Alan Von Altendorf, who is well versed in the field, forecasts costs to BP of $10 billion, RIG $1 billion. You can read his article here.  STO, and HAL are also impacted. You can bet legions of attorneys will be arguing this one for a long time.  They are all already dropping the ambulances and flocking to the Gulf coast billions of dollars beckon.

And this is how it always seems to play out doesn't it.  The road to peak oil is not a smooth slow upward trend.  Rather it goes in forward and back in jolts.  We are now seeing a jolt up, it is never a simple trend.  A full blown global crisis (markets are wildly down as I write this) may again drive oil prices dramatically down.  In the long run supply/demand issues and global fiat money printing will win out and drive oil prices much higher though.

Back in the 1960's we lived with the environmental illusions that as long as we picked up our litter, didn't carve initials in trees, followed Smokey the Bear's admonishments about disposing of cigarettes butts, and ate government recommended three square meals a day, all would be well forever.

Now thick oil on our beaches, hardwood trees dying by the thousands across the U.S. Midwest from exotic insects and fungi,  and 62% of Americans overweight or obese shows us just how delusional we have been.

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BP is said to be in panic mode, turning to its competior Exxon for help.  Just what can you do when the shutoff valves a mile deep don't work and before your very eyes you watch.



Non peak oil people can point to the gushing oil and say: "See, we told you so" the oil is there we just need to harvest it correctly.  And of course they are right, all or the above.

But it just takes one error, one uncontrollable factor to threaten and potentially destroy so much as we are now finding out.

The good life goes on and on and then suddenly, it doesn't.


But yet once you drop the simple explanation you see no one ever gets it exactly right when it comes to the future.  Pollyannish claims of American ingenuity and omnipotence  keeping us happily . . . .  But this has already failed.  We continue

Revised uninsured liability forecast:
BP: $6 billion clean-up, $1 billion litigation, $3 billion compensation, $4 billion lost revenue
RIG: $500 million legal expense, $500 million lost revenue
CAM: $100 million legal expense
HAL: $300 million legal expense
STO: $2 billlion lost revenue Norwegian offshore drilling moratorium

With three miles of rock and a mile of ocean overlay extreme pressure can build in deep wateroil and gas deposits.  Blow-out protectors are supposed to control these high high pressure surges but all it takes is error either human or mechanical and a disaster can result as we are finding out.