HPRgument Blog — June 10, 2010 9:22 pm

Don’t blame BP

By Carrie Summer

I’ve been following the BP oil spill situation with some interest, and I think that America has gotten it all wrong. The anti-corporation, anti-business sentiment is nothing new. Neither is the anti-big oil sentiment. But on closer inspection, this kind of attitude makes very little sense, and the way that the media is feeding into it (in some cases) just serves to increase the confusion.

We all hate that toxic, disgusting oil is pouring into our gulf, washing up on our beaches, and killing wildlife. We hate that fishermen and other business (such as hotels in Florida), through no fault of their own, will be financially hurt by the spill. They do need help in order to survive, and we as a nation should support them.

However, it makes very little sense to blame “BP”. What I’m asking is: What does it mean to blame BP, and what are the consequences of punishing it?

BP is a corporation made up of and built by over 90,000 employees worldwide. Since the spill, its share price has been halved, wiping out $84 billion dollars in market capitalization. Analysts have quoted a wide range for the potential cost of cleanup, claims, and legal fees, from $30 billion to $50 billion. Yesterday, as shares plunged another 15%, rumors started to fly that BP would soon either go bankrupt or be taken over by another oil company like Exxon or Shell. The probability of either of these happening depends on the size of the fine that the US government levies on BP, which in part depends on the political response to the anger and frustration of the American people.

But if we insist on putting the blame on “BP” broadly, who actually gets hurt? If the company goes bankrupt, thousands of people who work for BP in the US may lose their jobs. A secretary, accountant, or engineer who is just doing his or her job cannot be said to have any responsibility for the spill. Yes, get rid of Hayward and figure out whose ass to kick, but be specific about it. The top management should go, and punish those responsible for criminal violations of safety regulations lower down the chain as well. But there’s no reason for Americans to ask their politicians to destroy the company through legal damages and by forcing the company to pay the wages of workers who have been laid off due to the moratorium on deep-water drilling.

If the company is charged a huge fine (say, $20 billion), its stock loses all value, and it’s taken over by Exxon or Petrochina, who gets hurt? The employees who are laid off for “cost cutting” during the merger will be hurt. All the people in the US who own shares of BP will be hurt.  These are not necessarily the Wall Street tycoons that we all love to hate, but regular Americans who have BP stock in the mutual funds of their IRAs and 401(k)s. $84 billion has already been lost in the past two months due to BP’s misfortunes. The Brits are desperate about the damage that BP’s stock bust has done to the pension funds of the middle class. What about the owners and employees of the 11,000 BP gas and service stations around the country? In the enraged excitement over ocean and wildlife, no one has spoken up (and in general, in these situations, ever speaks up) for these other potential blameless victims.

I realize that sometimes you need to punish severely in order to deter others from repeating the same mistake. We don’t want to exact such a small fine on BP that other big oil companies think it’s okay to scrimp on safety and cause more environmental disasters. Exxon was probably let off too easily (ending up with a $2.5 billion fine); BP perhaps thought it could win a reprieve just as Exxon did. However, there’s no reason to let oil-covered pelicans outweigh all other considerations in making a judicious, pragmatic decision. Ultimately, we want to punish the corporation enough to warn others to be careful, extract the necessary resources from the company to pay for the cleanup, and let loose America’s fury only upon the specific decision-makers who were responsible for the oil spill.

My last point concerns the way that demonizing BP overlooks the positive story here. Who are the engineers who work tirelessly day and night to come up with innovative and technically challenging solutions to contain the spill? As much as we like to make fun of “Top Kill” and “Junk Shot,” shouldn’t those engineers get credit for preventing the country’s worst oil spill from becoming even worse? I think it would be a far more productive and uplifting media story to celebrate the (BP!) engineering heroes who have already made so much progress.

Image Credit: Flickr (US Coast Guard)

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  • Will Rafey

    I respectfully disagree. This post raises an important issue that was eloquently engaged in Will Leiter’s (the former HPR editor-in-chief) final endpaper in the Summer 2010 issue of the HPR entitled “What Are You Doing Next Year?”

    This is the issue of the ethical responsibility we all have in choosing which careers to pursue. Working for a corporation that cuts corners on environmental protection means supporting these practices. If a “secretary, accountant, or engineer who is just doing his or her job cannot be said to have any responsibility for the spill,” then who can? This post seems to suggest that “we as a nation” need to fix the problem — that the general taxpayer must rush to help out what BP unleashed.

    It is precisely this attitude that individual corporate workers are “just doing their jobs” — that they’re not responsible for the decisions of the corporations themselves — that perpetuates the myth that corporations are somehow above the law and above ethical constraints.

    The BP oil spill is far more than a few “oil-covered pelicans.” It continues to threaten the maritime industry of the entire Gulf Coast. That “regular Americans” who’ve invested in BP stock might get harmed is not a reason to let BP off the hook — it’s a reason to rethink how investment decisions operate and how the stock market serves to obscure our involvement in a system prone to catastrophic breakdown.

    Who are the engineers working tirelessly to contain the BP oil spill? No one knows, because they’ve done almost nothing to stop the flow of oil. But I’ll bet a lot of them are the same engineers that cut corners on the initial project that led to this disaster in the first place.

  • Will Rafey

    After doing some research, I realized that there is no student at Harvard named “Carrie Summer.”

    Perhaps it is revealing that whoever wrote this post felt it too controversial (or indefensible) to affix their name to it.

  • Kenneth Close Chritiansburg, Va.

    Well I will afix my name. Agreed BP must pay the price but how do you defend a Democraticly Held Congress and Democratic President from 50+ days of no action unless there is a government cover up going on ?????????? Afterall NOAA met the day of the spill and had of a worse case cenerio of 300000000 gals of oil but went with BP’s 1000 barrles(43 Gal) and these are our top scientest? I think the press right now is chasing the wrong end of the story. Thad Allen said everyting is being handled. BP is not allowed at the press conference so who is in charge? CNN chases workers all around and gets no answers. What happen to government? The other day congress was talking about a pitcher on the floor for heavens sake. Look past the heart and see the light. We don’t even know what the total destruction will be yet. I have family on the Gulf side of Florida so I do not say this lightly!

  • Carrie

    Hi Will, thanks for reading my post and engaging with me on the topic. I appreciate that.

    As for the psyeudonym, nice catch. All I can say is – I’m working this summer in an industry that does not look favorably on interns making political commentary on potential investments (not that I think my words will affect the share price!). I hope to write some more about the financial industry and various other business news this summer without feeling any sort of external pressure. Full disclosure: I don’t myself have any financial stake in BP.

    To address some of your points:

    Although you made a good point about how corporations as monolithic entities should not be “above the law,” I still think that corporations are primarily made up of people just doing their jobs. For instance, if the news broke today that Prof Pinker had been practicing some sort of horrifying brain experiments on children, would it be fair for Harvard to be shut down? The Dunster lunch ladies didn’t do anything.

    On the other hand, I agree that we should make our career choices with ethics in mind. This kind of thinking does not necessarily help in thinking about BP and other oil industry employees, unless we assume that the industry produces nothing but safety hazards and ecological disasters. BP produces and transports the gas that powers our country. I was definitely thankful for them so that I didn’t have to walk the three miles to high school every morning. You can’t say that the industry does not make any social contribution.

    I think for most employees who were involved (like those who died on the oil rig), the series of events that led to the spill was accidental. That’s why responsibility should only be assigned to specific BP leaders and managers who should made it first priority to avoid negligence and carelessness. So no, I don’t think that working for BP means that you support all of its practices (especially if you don’t know about them or can’t predict their future consequences)

    Furthermore, I want to clarify that I’m not asking for the government to clean up the spill. BP has enough assets on hand to be able to pay for the full clean-up, I think. It is what they call “political risk” or outsized government penalties (like the idea that BP should pay for any worker who has been laid off due to the drilling moratorium) that may bankrupt the company.

  • Jeffrey Kalmus

    First, I’d like to point out that Carrie’s argument is quite similar to the “too big to fail” arguments we heard during the financial crisis, even if hers is less apocalyptic. I’m not going any further with that thought, but it’s something to think about.

    My main point is about punishing BP for its corporate culture. 60 Minutes last month had a fantastic interview with a Deepwater Horizon survivor (http://www.cbsnews.com/video/watch/?id=6503436n&tag=api) which, in my interpretation, explains how BP’s corporate culture is largely to blame. Given that, severe punishment for the individuals involved makes me uncomfortable. Nor do I think that enormous monetary penalties would change the culture all that much. I think that BP should agree to change the incentives its middle management faces and, most of all, to change its safety procedures and its culture regarding safety to industry-leading ones. More important than squeezing an extra billion or two from BP, the Obama administration should focus on getting these new safety procedures absorbed into the institution and, eventually, into all the oil companies. Considering the government’s previously unused powers of regulation, I wouldn’t consider this an unwarranted intrusion into the private sector.

  • Jeremy Patashnik

    Carrie, I agree with you that the main goal of any actions the government takes against BP should be to prevent future companies from displaying similar negligence. That starts with removing the $75 million cap on BP’s liabilities and making them paying something much more close to the actual cost of the clean-up. (I’ve heard estimates that put that cost somewhere around $30 billion, but I don’t know how accurate that figure actually is.)

    But there’s a serious moral hazard problem here. Even if the cost of the clean-up is $30 billion, the cost to society of this spill is much higher. There are thousands of people in the gulf whose livelihood is threatened by this spill, and there’s a much less tangible cost society pays when we have polluted oceans (and pelicans with oil dripping off of them). It seems BP took none of this into account in its operations, or else presumably they would have been more prepared for a disaster of this magnitude.

    I’m sure following this incident, everyone will be much more careful, but 30 years down the road, maybe the memory of this won’t be as strong, and companies might be tempted to start cutting corners again. The government needs to make it clear that companies who want to drill need to take the environmental risks seriously–and be prepared to pay a hefty portion of the damages should a disaster occur–or else we leave ourselves vulnerable to experience this again.

  • Will Rafey
  • Brian

    Let me guess, Carrie…you’re working in the oil industry this summer.

    Your final “point” is laughable:

    “Who are the engineers who work tirelessly day and night to come up with innovative and technically challenging solutions to contain the spill? As much as we like to make fun of “Top Kill” and “Junk Shot,” shouldn’t those engineers get credit for preventing the country’s worst oil spill from becoming even worse? I think it would be a far more productive and uplifting media story to celebrate the (BP!) engineering heroes who have already made so much progress.”

    Engineering heroes? These same methods were used back in 1979 to try to contain an oil spill. An engineering hero would have come up with a method to stop any deep-water spill and would have demanded its inclusion in BP’s cut-and-paste Regional Oil Response Plan.

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