Why the Transocean/BP oil rig failed to take safety seriously and the lax regulatory enforcement is all starting to make sense.
We now know that the regulators themselves took bribes in the form of large gifts like sporting event tickets and free dinners, which likely played a role in why regulators often overlooked rig problems while performing “inspections.”
But what benefit is there for a company like Transocean, the drilling company hired by BP?
Turns out that there are several hundred million in benefits:
As the BP oil spill continues to blacken waters in the Gulf of Mexico and beyond, Lloyd’s of London has issued its first estimate of net claims from the disaster.
The world’s largest insurance market says total claims from explosion of the Deepwater Horizon oil rig could be between $300 million and $600 million.
The figure was based on information from an unknown number of Lloyd’s 78 syndicates with exposure to the disaster, including the limits of their individual contracts.
For their part in the largest oil disaster in US controlled waters, Transocean stands to make $270 million in profits:
THE owner of the oil rig that exploded in the Gulf of Mexico, killing 11 people and causing a giant slick, has made a $270m (Â£182m) profit from insurance payouts for the disaster.
The revelation by Transocean, the worldâ€™s biggest offshore driller, will add to the political storm over the disaster. The company was hired by BP to drill the well.
The â€œaccounting gainâ€ arose because the $560m insurance policy Transocean took out on its Deepwater Horizon rig was greater than the value of the rig itself. Transocean has already received a cash payment of $401m with the rest due in the next few weeks.
The windfall, revealed in a conference call with analysts, will more than cover the $200m that Transocean expects to pay to survivors and their families and for higher insurance costs.
[source: Times Online]
BP and Transocean let their safety processes slide, as did the regulators, and 11 people died as a result. Someone’s father, brother, son – and for what?
According to these reports, it was for money. What motivation do corporations have to protect their employees? When they can still profit from disaster, even after people die, then the only motivation is profit. Even after settlements with the families, these companies will come out ahead.
Will anyone be prosecuted? Like Goldman Sachs, there will be a show – heck look at the circus they’ve made of it now! In the end, no one, at least not those directly responsible, will be criminally charged with manslaughter or negligence, and as a result, corporations like BP, Transocean, Goldman, JP Morgan, et. al. will continue with business as usual – killing people, destroying lives, destroying sovereign economies, manipulating currencies & stock markets, and a host of other crimes against humanity, while our politicians turn a blind eye, because they, too, have been bought and paid for.
HE WHO HAS GOLD RULES…HE WHO DOESN’T GOES TO JAIL.
AIN’T AMERICA WONDERFUL.
(THE SHOUTING IS INTENTIONAL)
Does the Chicago Climate Exchange, Cap and (tax) Trade, Carbon Trading, “Green Economy” come to mind now? The destruction of that Oil Rig was a DELIBERATE ACT of sabotage in order to line the already bulging pockets(money) of Fat Cat slimeballs within the Government, and the futures commodities(Goldman Sachs, Wall Street) market. Every piece of information to link all this together is readily available for anyone to research. The government/corporate/media/military industrial complex of this country is now a complete criminal enterprise in total control of evrything in the U.S.A.
He’s the architect of this countries’ demise.Â
Just when everyone thought there was no possible way we couldÂ produce a bigger idiot than George………. in steps Barry Obungle!
All hail Mr. Hope and Change!Â Â
Now let me go vomit.
I am calling your bluff.
Obama for President in 2012!
Taylor, you make a valid point, however…
I’m not suggesting that some guy high-up at Transocean or BP said, “blow the rig and we’ll make a ton of money.” (Though, I cannot rule that out)
I am suggesting that because there is no threat of criminal charges if these companies and regulators fail to meet safety guidelines, then there is really no motivation for them to spend the extra money and time to enforce said measures.
Shutting down the rig to do the necessary repairs may have cost in the area of $500K a day. Someone up top made the decision not to do this because, well, it would have cost $500K a day.
In the end, it will cost much more, in human lives, money and economic impact.
My references to Goldman Sachs are not intended to, as you suggest, ” maneuver to get some additional Goldman Sachs-hatred related search hits on his blog.”
The references are intended to display the moral and ethical bankruptcy of the private corporation of today. When there is no oversight and no accountability within the regulatory or corporate structures, your end result is corporations like Goldman, BP, Transocean (to name a few) whose only motivation is profit.
The logic of your point is still flawed. It only makes sense to avoid necessary maintenance due to cost considerations and risk a massive blowout under one of two conditions:
1.) the entire cost of a resultant blowout (including the opportunity cost of not being able to actually produce oil, along with the loss of all the oil into the sea that can not be sold as a result of the blowout) is less than the cost of taking the rig “offline” for a period of time to perform the necessary maintenance
2.) various regulations and costs imposed by government authorities have so detracted from the capital base of the company in question that they literally can not pay for the repairs necessary even though they would calculate that doing the repairs would be less costly than suffering the costs of a blowout + cleanup.
The reason your entire post + logic is confused is because you somehow have led yourself to believe that private corporations, or any business entity, for that matter, can make profits from destroying their productive capacity. You may be correct that a firm might make the error of trading short term profits for long term risk, say, if they forgo necessary maintenance due to cost– but in the long run the “costs” of this decision catch up with them and they suffer an accident that proves far more costly than the earlier maintenance ever would’ve been.
If we followed your logic, we’d have to believe oil companies go into business to destroy oil wells, not to produce oil from them. That’s an absurd idea on its face, hopefully this is now obvious why.
In a free market, the profit motive not only encourages a firm to cut costs anywhere they can, but to cut costs SENSIBLY, that is, to not cut costs in such a way that they will expose themselves to great legal and economic risk (and therefore, financial risk) in the future by making a short-sighted decision now.
You quote Mises at the top of your site– you really ought to go back and crack open his wonderful book, Human Action, and read about the profit motive a bit more because right now you don’t seem to understand it.