My Mountain Trail

BP Should Step Up, and So Should We

Saturday, June 12th, 2010

This blog is not about current events, but sometimes there is no choice. This blown well in the Gulf of Mexico is a catastrophe, and BP, and the oil industry in general, has done a terrible job managing the problem. Hey, what do I know about that? I’m not a petroleum engineer, drilling engineer, ocean scientist, geologist, or biologist. But I used to drive a nuclear powered submarine owned by the US Navy.

If, when I was driving that submarine, we had a small explosion that, for arguments sake, resulted in us ejecting the core of our reactor (you can’t do that without imploding/exploding a submarine by the way) into the ocean and the response of our Navy leadership had been “It’s a big ocean, don’t worry about it”, do you think that dog would hunt? How about, “Well, the core is very deep and we might figure out how to contain that radioactive disaster in a few months. In the mean time, we will just continue business as usual in addition to trying a bunch of wild guess projects to recover the mess — and don’t worry about the damage, we can afford it.” How about that? Will that dog hunt? Of course not.

In the nuclear world, a much smaller mistake would result in a major re-evaluation of the entire industry. All nuclear organizations would hunker down and start working on making sure that problem and anything like it would NEVER happen again. All resources would be directed at the problem. Dividends would NOT be paid — lines of credit would be, er, lined up, to cover the expense of never letting it happen again. The problem would not be minimized.

Further, the world would be furious at us for making a stupid mistake such as that. I guess the one counter to all that is if that had happened, it would have been covered up and you would never know. But that’s another blog…

So anyway, I don’t get it. What is BP thinking saying they have deep pockets and it is okay to pay dividends when they don’t know how expensive their clean-up will be. How irresponsible can you be? What is wrong with the British politicians complaining that one of their biggest, most respected company’s is being treated unfairly by the stock market and the American government and press? What?! Hey, I own BP stock (through a mutual fund) and I don’t think my investment guarantees me a dividend if the company I invested in made stupid decisions. That’s the risk I took. That’s the risk those pensioners in the UK took too. The risk reward equation includes losses. It would certainly be another stupid decision to pay me a dividend without knowing the liability incurred by this blowout. If the risk turns out to be moderate, pay me more later.

Finally, we all need to step up. Our insatiable appetite for oil in our country drives oil companies to take more risks in more difficult conditions than ever. We need to cut our demand for oil. It’s hard, but it can be done. Ride your bike to work once a week. Consolidate trips. Drive slower. Turn your thermostat towards the outside temperature. Take shorter showers. Get solar panels. Figure it out. The world is changing and this may be the tipping point — which is probably a good thing for the long term.

Okay, this economic rant is over.