It’s tempting for policymakers to react to a tragedy by quickly passing legislation. The Sarbanes-Oxley financial reform bill, for example, was rushed through Congress after the meltdown of Enron and WCOM. Today, many question the impact of this reform which added considerably to the cost of doing business, but probably did very little to prevent corporate fraud and protect investors.
We may see something similar in the wake of this oil spill. It’s certainly a disaster, and people need to figure out why it happened and how to prevent a repeat. Those responsible should be held financial responsible. But it’s also important to keep the event in perspective, and not embrace policy solutions that seem like political short-term winners, but are long-term policy mistakes.
The WSJ has an editorial today that makes this case well:
The harm [of the oil spill] will be considerable, which is why it is fortunate that such spills are so rare. The most recent spill of this magnitude was the Exxon Valdez tanker accident in 1989. The largest before that was the Santa Barbara offshore oil well leak in 1969.
The infrequency of big spills is extraordinary considering the size of the offshore oil industry that provides Americans with affordable energy. According to the Interior Department’s most recent data, in 2002 the Outer Continental Shelf had 4,000 oil and gas facilities, 80,000 workers in offshore and support activities, and 33,000 miles of pipeline. Between 1985 and 2001, these offshore facilities produced seven billion barrels of oil. The spill rate was a minuscule 0.001%.
According to the National Academy of Sciences-which in 2002 completed the third version of its “Oil in the Sea” report-only 1% of oil discharges in North Americas are related to petroleum extraction. Some 62% of oil in U.S. waters is due to natural seepage from the ocean floor, putting 47 million gallons of crude oil into North American water every year. The Gulf leak is estimated to have leaked between two million and three million gallons in two weeks.
Such an accident is still unacceptable, which is why the drilling industry has invested heavily to prevent them. The BP well had a blowout preventer, which contains several mechanisms designed to seal pipes in the event of a problem. These protections have worked in the past, and the reason for the failure this time is unknown. This was no routine safety failure but a surprising first. …
…As for a drilling moratorium, it is no guarantee against oil spills. It may even lead to more of them. Political fantasies about ending our oil addiction notwithstanding, the U.S. economy will need oil and other fossil fuels for decades to come. If we don’t drill for it at home, the oil will have to arrive by tanker and barges. Tankers are responsible for more spills than offshore wells, and those spills tend to be bigger and closer to shore-which usually means more environmental harm.
The larger reality is that energy production is never going to be accident free. No difficult human endeavor is, whether space travel or using giant cranes to build skyscrapers. The rest of the world is working to exploit its offshore oil and gas reserves despite the risk of spills. We need to be mindful of such risks, and to include prevention and clean up in the cost of doing business, but a modern economy can’t run without oil.