Saturday, 8 May 2010

Deepwater Horizon and Obama's Misdirected Lynch Mob

Long before any of the facts about the Deepwater Horizon accident became known, President Obama led the American people in pinning all blame and liability upon British Petroleum Plc, who had leased the rig to drill on a site they had a licence for. (The process of getting a licence involves paying money to Federal and State governments).

The rig was owned and operated by the Swiss company, Transocean, and the actual work directly involved in the accident was being done by the sub-contractor, Haliburton, a name that ought to be recognized by anyone who has an interest in political scandal and corruption in the United States, or Iraq.

Under American law, BP carry all the liability, because they own the licence on the well. Placing the moral blame on them as well, is typical Chicago politics. But if anyone is actually looking for the intrinsic cause of this and other oil-industry accidents in the United States, it is precisely this:

The liability for the environmental and economic damage caused by an accident, is carried by the exploration licence holder and not the owners and operators of the massive and specialized equipment being used, or their sub-contrators. This takes a powerful incentive to be careful, vigorously enforce safety regulations and invest in the very best equipment and training -and places on the company that doesn't directly own and control the men and equipment at risk of accident. Those who actually are responsible for the day to day operations of the rig and long term investment in its structure and equipment, are sheltered, by their paying customer, from the consequences of careless, cost-cutting and incompetence.

There does not appear to be a single public figure in the United States capable of understanding why this is not merely unjust, but exposes the American economy, environment and people to risks which equal or exceed those so horribly realized by placing liability and responsiblity in the banking system in the wrong places.

If you want things to be done right, you have to get the responsibility and liability in exactly the right place.
At the very least, when companies such as Transocean and Haliburton mislead their customers over safety, (to the extent of hosting a party onboard for the customer's executives to celebrate the alleged safety record on the day of the accident) they should lose the shelter against liability provided, under American law, by those customers.

And if you want to learn lessons from complicated accidents involving equipment a mile down in the Ocean, it really is best not to allow politicians to stand in front of cameras and proclaim the conclusion of any investigation before it even starts.

President Obama is going to destroy BP as a lesson to others, if he can. And then some other company, possibly even an American-owned one (as the wiser foriegn investors all flee) will suffer a similar or worse accident because the intrinsic cause in the liability environment is neither understood nor addressed by American lawyers and politicians.

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