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ВЕСТНИК ЮГОРСКОГО ГОСУДАРСТВЕННОГО УНИВЕРСИТЕТА
_2011 г. Выпуск 4 (23). С. 45-48_
УДК 502:338
ECONOMIC AND POLITICAL CONSEQUENCES OF THE ACCIDENT IN THE GULF OF MEXICO IN 2010
O. V. Gokova, I. V. Gokova
On April 20, 2010 there was an explosion on the oil drilling rig «Deepwater Horizon» located 80 km from the coast in the Gulf of Mexico and managed by «British Petroleum». As a result of the explosion 11 workers were killed and 17 others were injured. Shortly after the rig sank leaving the oil well gushing. On July 15, 2010, the leak was temporarily capped. On September 19, 2010 the well was declared «effectively dead».
It is the largest accidental offshore oil spill in the history of the petroleum industry: an estimated 1000 tons per day escaped from the well located resting on the seafloor approximately 1,500 m. The oil spill which covered 1000 km2 caused extensive damage to marine and wildlife habitats in the coastline of Louisiana and other U.S. states. According to the «Flow Rate Technical Group», the leak amounted to about 4, 9 million barrels of crude oil [10]. So the aim of this study is to analyze the economic and political consequences of the accident in the Gulf of Mexico in 2010.
Several issues need to be considered:
- the causes and main consequences of the accident in the Gulf of Mexico to the region's
ecosystem;
- the main consequences to the regional economic development;
- the political consequences of the accident to the rating of U.S. President B. Obama.
In September 2011, the U.S. government published its final investigative report on the accident. In essence, «ВР» - the owner of oil drilling rig, the Swiss company «Transocean» (the owner of this oil field), and the American corporation «Haliburton» that was in charge of cleaning up the oil spill were, in different ways, responsible for the accident. But most of all claims were directed to «BP», which was responsible for the safety of the drilling rig [10].
«British Petroleum» is a global oil and gas company headquartered in London. It is the third-largest energy company, the fourth-largest company in the world measured by revenues and one of the six oil and gas «supermajors». The company has operations in over 80 countries, produces around 3. 8 million barrels of oil equivalent per day and owns more than 22,000 service stations worldwide. In Russia, «BP» owns 50 % of «TNK-BP». It accounts for a fifth of BP's global reserves, a quarter of BP's production, and nearly a tenth of its global profits [3].
This accident will have an extremely negative impact on the regional ecosystem for several dozens years. The U.S. President B. Obama referred to the accident in Gulf of Mexico as to «a massive and potentially unprecedented environmental disaster» [1]. Hundreds of km of the Gulf from Florida to Louisiana were contaminated by oil. More than 120 species of birds, population of sea turtles, mollusks and dolphins were affected by the oil spill. More than 65 km of Louisiana's shoreline has now been oiled. Oil slicks have slowly reached the marshes and national parks, and they were threatened. There are many tropical coral reefs in the Gulf of Mexico, whose fragile ecosystem could be smothered by oil spills. But the real environmental consequences of this accident can be assessed only after a few years [6].
However, this accident also carries serious economical and political consequences. First of all, it affected thousands of local fishermen. The fishing industry in Louisiana employs over 27,000 people and accounts for 40 % of all the seafood caught in the USA. For three and a half months the commercial and recreational fishing in affected federal waters was closed, and even now some restrictions are still effective [11].
In addition to it, in coastal states - Louisiana, Alabama, Mississippi and Florida - many fish, oysters and shrimp farms are seriously affected because of the oil spill. Suppliers of seafood are suffering huge losses and the prices for those goods in the USA have increased sharply [6].
The oil production is a crucial industry to the United States. Shelf oil system brings in U.S. GDP up to 11 billion dollars annually. Only federal oil offshore drilling rigs (3 or more miles from the shore) produce 27 % of all the U.S. oil and 14 % of the gas. With the three-mile maritime zone which belongs to the states, these figures should be increased at least by one third - up to 36 % and 20 % respectively. To support the production level the USA needs almost continuous drilling of new wells in the seafloor, which contains about 10 % of explored gas reserves and 40 % of the oil reserves [11].
Only in March 2010, President Obama introduced a plan of a new energy program. The President's plan includes the lifting of the 20 years offshore drilling moratorium and expanding domestic offshore oil and gas exploration in Alaska and the eastern Gulf of Mexico. Oil reserves in the Gulf of Mexico is estimated at 14,5 billion barrels, and their development will reduce the dependence of the U.S. economy on imported energy [2].
In the U.S. there is a strong environmental lobby and therefore this accident had a negative impact on the oil field development in this region. In July 2010 Obama's administration issues a new moratorium on offshore oil drilling in the deep-water of the Gulf of Mexico, which threatened thousands of workplaces. No wonder, this ban has caused a backlash from not only the oil companies, but also by the public. According to the U.S. Department of Labor, the ban on drilling led to 8 to 12 thousand people temporarily losing their jobs [10].
Because of political and financial influence, this moratorium was lifted in October 2010. So, now to continue the drilling the companies must comply with all the new requirements, to improve the safety of such works and to retrain staff. According to the head of the Centre for Environmental Studies at the University of Maryland and member of a government commission on investigation the causes of the accident D. Boyh, it will take quite a long time, since now the development of the U.S. oil industry has seriously suffered [4; 10].
Most experts agree that many countries will follow the U.S. example. They will reconsider the opportunity of drilling in certain fields, freeze technologically risky projects and tighten the safety requirements. In recent 10 years the oil and gas drilling has been mostly carried out offshore, since the majority of onshore fields have been exhausted. Today offshore drilling accounts for up to 60 % of the world's oil and gas drilling. Therefore, even a temporary «freezing» of such projects can seriously reduce the market supply of energy resources [11].
Oil production in the Gulf of Mexico also has some political importance. Many experts believe that there is a relationship between early lifting of the moratorium and the desire of the Obama's administration to restore his political position. The development of these oil fields is important for energy independence of the USA from foreign suppliers - Venezuela, Brazil and the Middle East.
Specialists draw an analogy between this accident and the hurricane «Katrina», which happened during George W. Bush's presidency in 2005. In spite of the fact that the rating of President Obama was higher than that of G. W. Bush after hurricane «Katrina», his position has considerably weakened. The opinion poll of the American Institute of Public Opinion «Gallup» showed that Americans give B. Obama 42 % against 33 % approval rating on his handling of the oil spill in the Gulf of Mexico. To compare: after «Katrina» 42 % against 35 % Americans disapproved the way G. W. Bush's administration handled the catastrophe [8].
But most Americans, according to the «Gallup», think that the President should be much tougher in dealing with «BP» - the company that operated the oil leaking rig. 71 % of Americans argue that B. Obama is not tough enough in dealing with «BP» in regards to the oil spill. Also 8 out of 10 Americans believe that U.S. economy will suffer, and gas and food prices will increase. 6 out of 10 respondents believe that the «British Petroleum» should pay off all the losses (including wages of workers who are out of work because of the oil spill) even if it drives the company out of business. Americans see the federal government as a force that could make the company answer for the consequences [8].
As for financial losses of the «BP», according to the Swiss investment bank «Credit Suisse», they might exceed 17 billion dollars and that is just for dealing with the consequences of the disaster. As for the compensation of economic damage to fisheries and tourism the losses might amount
Economic and Political Consequences of the Accident in the Gulf of Mexico in 2010
to not less than 14 billion dollars. Even for such profitable companies as «BP» it comprises a huge amount of money [5].
Many experts provide advice to the U.S. in order to prevent similar accidents in future. Oil Spill Investigation Commission Co-Chair William K. Reilly said that «as drilling pushes into ever deeper and riskier waters where more of America's oil lies, only systemic reforms of both government and industry will prevent a similar, future disaster». The Commission Co-Chair Bob Graham said that «existing conventional or "baseline" safety regulations in the U.S. should be expanded to address all features essential to well safety, and should be updated and enhanced to ensure safer drilling in all U.S. offshore operations - including drilling in deeper waters and less well-known geologic areas» [9]. The World Wildlife Fund is renewing its call for a moratorium on gas and oil development in the deep-waters «until there is a better understanding of the risks and an improved capacity to respond to spills and other environmental hazards» [12].
In our opinion, the oil and gas industry must adopt a culture of safety. This industry should be required to demonstrate how their processes and procedures will better manage risk to achieve safer outcomes. Drilling operators should be financially responsible for the consequences of failure. And we also believe that this unprecedented accident may stimulate in the near future an intensive search for alternative energy sources, which would be a way out of a difficult energy situation in the U.S.
In addition to it, in the President's view, «this economic and environmental tragedy underscores the urgent need for the USA to develop clean, renewable sources of energy. Doing so will not only reduce threats to our environment, it will create a new, homegrown, American industry that can lead to countless new businesses and new jobs». President Obama said that The House of Representatives has already passed a bill that would finally jumpstart a permanent transition to a clean energy economy, and there is currently a plan in the Senate. He said: «I've made huge investments in clean energy, why we continue to promote solar and wind and biodiesel and a whole range of other approaches, why we're putting so much emphasis on energy efficiency» [7].
It is interesting that scientists have calculated that if solar panels covered only 1 % of the Sahara Desert, there would enough electricity for all the Earth population. Recently, 20 large German companies have developed such a project. Such financial and industrial giants as «Siemens» and «Deutsche Bank» will take part in this project. Engineers plan to bring the total capacity of all solar cells to 100 gigawatts. It will take 10-15 years of work and 400 million euro investments [4].
To sum up, the accident in the Gulf of Mexico has serious environmental, economic and political consequences for the future development.
The main economic and political consequences of this accident include:
- considerable losses of fish industry in the USA;
- loss of workplaces in fishing and oil companies in the region of the accident;
- considerable slowdown in the U.S. oil industry because of the moratorium on offshore oil drilling in the deep-water of the Gulf of Mexico;
- decrease of U.S. energy independence on foreign suppliers of oil and gas;
- lowering of approval rating of the U.S. President B. Obama;
- the intensive search for renewable sources of energy in order to ensure U.S. energy independence.
The bottom-line idea of the accident for Americans was expressed by the Commission Co-Chair Bob Graham: «Specific actions must be taken by Congress, by the Administration, and by industry to reduce the likelihood of a similar tragedy» [9].
REFERENCES
1. Barack Obama's speech «Gulf of Mexico oil spill an environmental 9/11», June 14, 2010 // The Telegraph. - http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7827301/ Barack-Obama-Gulf-of-Mexico-oil-spill-an-environmental-911.html. - 21.10.2011.
2. B. Obama's speech «Oil production from federal waters in the Gulf of Mexico reached an alltime high», March 11, 2011 // PolitiFact.com : The Internet newspaper. -http://www.politifact.com/truth-o-meter/statements/2011/mar/15/barack-obama/ barack-obama-says-gulf-oil-production-hit-record-l/. - 22.10.2011.
3. BP Global // British Petroleum. -http://www.bp.com/bodycopyarticle.do?categoryId=1&contentId=7052055. - 02.11.2011.
4. Interview with dean of the University of South Florida College of Marine Science W. Hogarth about the BP oil spill in the Gulf of Mexico [Электронный ресурс] // The Bloomberg. -http://www.bloomberg.com/video/60230848/. - 22.10.2011.
5. Interview with the chief executive of British Petroleum T. Hayward [Электронный ресурс] // The Guardian. -
http://www.guardian.co.uk/business/2010/may/13/bp-boss-admits-mistakes-gulf-oil-spill. -22.10.2011.
6. McQuaid J. The Gulf of Mexico oil spill: an accident waiting to happen // EnergyBulletin. -http://www.energybulletin.net/node/52763. - 22.10.2011.
7. Obama's Gulf spill speech (full text, video), June 15, 2010 // The Huffington Post: The Internet newspaper. -
http://www.huffingtonpost.com/2010/06/15/obamas-gulf-spill-speech_n_613554.html. -21.10.2011.
8. Obama receives 44 % approval on oil spill while BP gets 16 % [Электронный ресурс] // Gallup. -http://www.gallup.com/poll/140957/obama-receives-approval-oil-spill-gets.aspx. - 03.11.2011.
9. Press release, National Commission on the BP Deepwater Horizon oil spill and offshore drilling, January 11, 2011 // The Consortium for Ocean Leadership. -
http://www.oceanleadership.org/wp-content/uploads/2011/01/Final-Report-Press-Release.pdf. -03.11.2011.
10. Special report «The Economic Impact of the Gulf of Mexico Offshore Oil and Natural Gas Industry and the Role of the Independents», July 21, 2010 [Электронный ресурс] // NOIA: National Ocean Industries Association. - http://www.noia.org/website/download.asp?id=39991. -22.10.2011.
11. White J. Economic impact of Gulf of Mexico oil spill varies by industry [Электронный ресурс] // NOLA.com: New Orleans newspaper. -
http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/economic_impact_of_gulf_of_mex.html. -22.10.2011.
12. WWF warns about drilling risk [Электронный ресурс] // Ecoworld. -http://www.ecoworld.com/land/oil-drilling/. - 05.11.2011.
