The pelicans and fishermen of America’s gulf coast are not the only victims of the brown sludge floating in from the Deepwater Horizon blowout.
The catastrophe, which killed 11 workers and caused possibly the biggest environmental headache the US has yet seen, has poisoned everything it touches. Nonetheless, we must look forward. The well will close, the Gulf will be cleaned. But will we have an energy future that builds on the lessons learnt from this tragedy or will we run away from risk?
Can a foreign company foul America’s nest, kidnap a President’s calendar, accentuate his diminishing power and survive? And what about BP’s traumatised CEO? Can he lead his company back from disaster? What about the larger industry? What role should oil companies play in our energy future?
America and the rest of the world need BP and the oil industry to simply do their jobs. Like it or not, we remain in a hydrocarbon age — bashing the oil companies won’t change that. The notion that this is the end of oil or that the big oil companies must diversify is nonsense. Newer alternatives are not capable of carrying the load. Electric cars and biofuels will not replace petroleum for decades — and probably never will.
Wind and solar power cannot replace coal and gas. The variable energy of renewables cannot be a substitute for the constant energy of fossil fuels. We may replace the internal combustion engine with hydrogen fuel cells, but that is still decades away. In the meantime we need more hydrocarbons.
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There are more coal, oil and gas reserves waiting to be discovered or developed than the world has so far used. They remain affordable and efficient. The industry could increase production from 85 million barrels per day to 100 million or more and sustain such production for decades ahead. Some oil companies may choose to diversify into other areas. But it’s a choice, not an iron necessity.
So what about deepwater drilling? Isn’t it too dangerous? Forty years of drilling and 35,000 successful wells in the Gulf of Mexico speak for themselves. Technology, equipment, processes and systems are safe, but for human error. So it would be folly to discontinue or even suspend it — a view upheld by the Federal Court this week when it struck down the Obama Administration’s six-month moratorium on such drilling in the Gulf. The oceans may also be home to other natural resources that can be extracted in the future — especially precious metals and other mineral commodities, where technology can enable the production of vast new quantities of materials that the world needs.
What matters most for BP is execution of task. It does not have to declare bankruptcy, be taken over, or be prevented from properly rewarding its investors. Public confession and humiliating compensation accounts will work for a while in keeping the pressure off the company, but if its back is to the wall it can resort to the US courts for protection.
ExxonMobil did so after the Exxon Valdez disaster. Twenty years of court protection against punitive damages ensured its financial capacity and long-term success. BP may have to do the same to protect the enterprise. It must be responsible for the mess it has caused but it should not allow itself to be managed from the White House or Capitol Hill by individuals who have no knowledge or ability to run a company in good times, let alone in crisis.
For BP’s chief executive, Tony Hayward, the future is less certain. He should have left America to his US managers. They understand natives on the Big Island. The BP board will have to decide at the appropriate time when the unrecoverable loss of confidence by US stakeholders has undermined his ability to lead the corporation. Life is not fair.
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For the wider oil industry, the future has been made more problematic, but it is not impossible. Sticking strictly to improved standards of oil well design, ditching more outdated equipment, robust safety procedures and a more collaborative response to new oil spills will all help to renew confidence in Big Oil. Human factors are the greatest danger to it. Perhaps rigs need a pilot and co-pilot, like aircraft; perhaps they need full-time government inspectors.
Meanwhile, America still needs its 10,000 gallons-per-second daily ration of oil. (It can export the risks that come with extracting energy from the ground to the Middle East or elsewhere in the world but it can only do so at great cost to its security, economy and standard of living.) And Chinese consumers will purchase more than 13 million cars this year. Both the near and medium-term outlooks demand more — not less — oil and natural gas. The speed at which the world invents its 21st-century energy systems will not be fast.
So even if the leak in the Gulf of Mexico doesn’t mean that we need to panic, we still need a new approach to energy. We need a 50-year plan to establish a balance of future energy supplies from oil, gas, coal, nuclear, hydropower, geothermal, hydrogen, wind, solar and biofuels.
We also need to adopt plans for greater efficiency such as the elimination of the internal combustion engine. The world needs more environmental protections to make sure that land, water and air are sustained for future generations. Also we need more infrastructure to transport energy from where it is produced to where it is consumed.
Finally politicians in most nations have demonstrated a perpetual inability to decide on the future of energy. The 21st-century makeover of energy and the environment that is needed will only happen if elected representatives develop the courage to hand over such governance to independent bodies staffed by experts, so that their electoral ambitions do not undermine the continuity of what actually has to be done.
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John Hofmeister is a former president of the Shell Oil Company, founder of Citizens for Affordable Energy and author of Why We Hate the Oil Companies: Straight Talk from an Energy Insider (Palgrave Macmillan)