Offshore Reform?

"I will not tolerate more finger pointing or irresponsibility," an angry President Barack Obama said at the White House Friday, following a meeting on the disastrous oil spill in the Gulf of Mexico. The president said all parties, including the federal government, should accept responsibility. President Obama also announced steps he was taking to end the "cozy relationship" between the oil companies and the regulators.

The president's frustration was a stark contrast to earlier comments made by the head of British Petroleum, appearing in today’s Guardian newspaper. "The Gulf of Mexico is a very big ocean," observed Tony Hayward, the CEO of BP. "The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume," he said. Mr. Hayward should be fired.

The Gulf oil disaster resulted in the deaths of eleven workers and untold damage to the region, its wildlife and small businesses along the coast. Not to mention that the spill, which began three weeks ago, continues unabated to wreak havoc on the region because BP can't find a way to stop the leak. In fact, BP doesn't even know how much oil is pouring into the Gulf each day.

One estimate is that the total oil spilled into the Gulf exceeds by five times the magnitude of the Exxon Valdez spill off the coast of Alaska. Damage from the Exxon Valdez disaster is still visible twenty years after the incident. And many claims made against Exxon resulting from that incident took twenty years to settle.

Mr. Hayward notes, "Apollo 13 (the aborted lunar landing) did not stop the space race. Neither did the Air France plane last year coming out of Brazil (which crashed) stop the world airline industry flying people around the world. It's the same for the oil industry."

The Apollo flight was known as a "successful failure" because its crew returned safely to earth. But there is no way that BP's failures in the Gulf will be characterized as successful. The same applies to its failures in 2005, when fifteen of its workers died in an explosion at BP's Texas refinery.

Representatives from three companies involved in the accident appeared at Congressional hearings earlier this week and each of them tried to shift blame elsewhere. Today President Barack Obama slammed the companies for what he described as a "ridiculous spectacle" of representatives of BP, Transocean and Halliburton "falling over themselves pointing fingers at someone else."

A deeply infuriated President Obama nine times called for the leak to be stopped during his brief remarks. He reaffirmed that "BP is responsible for the leak and it will pay for these spills, not the taxpayers." He estimated that one million feet of barrier booms have been deployed, four million gallons of oily water have been collected and 13,000 people are working on the spill.

Of course, today oil is an important commodity for all Americans. But the Gulf of Mexico and the life it sustains are not commodities. So while the president reaffirmed his commitment to offshore drilling as part of a comprehensive energy policy, he most urgently called for top to bottom reforms of the industry and its regulators. Even as the leak continues, several important investigations are underway and many more will follow.

Meanwhile, in his remarks President Obama said, "I will not rest until the leak is plugged and the oil spill is cleaned up." BP CEO Tony Hayward seemed more confident in his Guardian interview, "We will fix it. I guarantee it. The only question is we do not know when."

As a sign of good faith and its recognition of BP's full responsibility, Mr. Hayward should put BP's first quarter profits, $5.6 billion, in a special "Gulf Oil Spill Cleanup" account. After all, there are plenty of reasons not to trust BP.

The Gulf oil spill of 2010 is certain to change the oil industry forever. But oil company lobbyists are already busy working hard to mitigate future damage to their businesses by courting elected officials in response to this crisis. So the question is, just how much change is really in store for the oil industry?