Categories: Big oil / Crisis management / Energy issues

2 June 2010

One comment

Will BP’s regulators share the blame?

Who’s to blame for the blowout in the Gulf? It’s a fair bet that the corporations involved will get stuck with most of the opprobrium. But I’m more inclined to blame the regulators and their masters, the politicians. What’s BP to say about its plight? I’d say the big thing is for them to stress that, with luck, they’re here for the long haul. They want to fix the problem, clean up the mess, learn the lessons and go on aiming to be the “best in class”. The rest of the truth will need to be told by third parties. 

BP is on a knife-edge. They can’t seem attractive (and suitably penitent) whilst blaming others, and yet they are not alone in causing the accident in the Gulf. (Leave aside that they’ve got a gaffe-prone CEO who says that he wants things to go well because “I’d like my life back”. A severe shortage of pre-accident media training there, I fear.)

But in time – and that time isn’t yet, not by a long chalk – BP may well find itself able and required to discuss (first in private with sympathetic mature journalists and opinion-formers) where other parcels of blame lie.

It may well be that Transocean or Halliburton or others are culpable in some degree, perhaps even greatly. But how about those nice regulators who are the thin line between corporate greed and the fragile public and planet?

I am pretty sure that if there’s blame to be spread, the regulator is as much at fault (or as innocent) as BP or other firms. Indeed, I am inclined to think that the regulator is more to blame based on what I’ve learned from the circumstances behind all of the disasters I’ve ever studied. I’ll return to this another time, but from Titanic to Three Mile Island, I’m struck by how technological failure has flowed from regulatory failure rather than greed. I mean that very often – most often – the private sector fails when the public sector thinks it’s doing fine and has signed-off on its behaviour. (The modern financial failures are examples of this, by the way.)

So I reason that it was more the regulator’s job to drive, own, the “what-if” process than BP’s. It isn’t exactly BP’s job to be gungho and alpha-male. But, certainly, in the modern highly-regulated and accountable world the corporation is in a proper and allowed tension with its regulators. Indeed, I hold the view that regulators are rather feeble in hardly ever accepting a proper share of responsibility.

Unless BP has purposely pulled the wool over our eyes, something I doubt, or didn’t carry out its agreed obligations, which remains possible, I think BP ought to be cut a good deal more slack than it actually will be.

It looks likely that BP was operating in the Gulf of Mexico at the edge of technology’s capabilities in a high risk environment. (Krauthammer in the Washington Post argues that’s because of green prejudice, a nice argument I won’t pursue.) If it turns out that BP’s bad luck was to have an accident that no regulator or operator on earth had made allowances for then BP has the makings of a sound defence.  Though, paradoxically, even if that’s proven true, that’s an argument which can’t be pressed too loudly in polite society without risking a backlash.

There’s little doubt, then, that the blame will stick with the corporations (it may widen from BP as Shell fears here). That’s not least because regulators and the politicians will wriggle out of it and the media will prefer to hound BP and the other corporations to hounding the regulators and governments. That’s unless, and I’m dreaming here, the balance of third party opinion comes down on BP’s side.

I am almost sure – and far from happy about it because I believe BP should say what it knows or believes to be true – that there is very little BP can say today credibly in public. It cannot exonerate itself to any degree without appearing to avoid responsibility. It is up against quite deep human prejudices and tastes.

People love disaster and villainy. That’s why certain accidents have had mythic narrative power which no amount of good evidence can shift.  The Titanic, Three Mile Island, Chernobyl and Exxon Valdez, are powerful cases where the very names have stuck emblematically in our minds. Their very mention comes with the clutter of preconceived ideas about class, capitalism, corporations, technological over-reach. BP will, presumably, now join that list. Like the others, it will probably be a good example of an operation which went on to do good work whilst exploiting plenty more technology. But it will serve as an example of bad-intentions and hubris.

It is just possible that this event will sink BP. But that would make it truly unique (even the owners of the Titanic didn’t go under).

Away from the hype, the financial market will look at this issue in a wholly cash manner. What will the accident cost? Will BP face difficulty getting US or other licences? Yes, this might well be a transformative event for the entire petroleum industry. But the market may think that BP is becoming case-hardened in a big-time way.

Therefore the outcome of the whole affair provides BP with an opportunity to take pole-position in the battle to reshape the industry’s worldwide image. After all, the world remains as dependent as ever on petroleum, so there’s a lot of mutual self-interest out there. There’s also a lot of cognitive dissonance. Plenty of firms feel forced to align their reputations with tragedies, real and very often imagined, as if they were responsible for them, but still do good business regardless. Some of my colleagues – cynically, perhaps – call that hit on the company’s reputation the price of securing a licence to operate.

One response to “Will BP’s regulators share the blame?”

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