The Big Gulf Bailout
The Real Costs of the Gulf Oil Spill are ones we'll all bear
We're almost at the happily-ever-after stage of the gulf oil-spill story. The well has been killed, the beaches are being scrubbed and wicked Tony Hayward has been banished to Russia. All that's left now is for BP to make good on the damage it has caused. The company has set aside $32 billion to meet its liabilities, while doing everything in its power to keep the damages below that figure. But even if it has to pay the full price, it will have won one of the biggest bargains in corporate history. BP's true debt is far higher than any of the figures that have been floated to date. The biggest costs to the gulf have yet to be seen.
It was clear early on that BP was as committed to engineering the public perception of the spill as it was to cleaning it up. Soon after launching its clean-up operation, BP banned photographers from taking aerial shots of the slick, citing "safety precautions." Similar methods continue to be used to prevent media access to key sites, and in its own press releases, BP has doctored photos to make its clean-up efforts appear more strenuous.
In addition to making sure the slick was under-recorded, the company worked hard to make sure there was less of it to be seen. Besides the prison laborers who mopped up the oil at a discount on shore, at sea, over 1.8 million gallons of Corexit dispersants were used to make the oil vanish from sight. Such dispersants are banned by the Environmental Protection Agency, but the Coast Guard issued exemptions some seventy-four times in forty-eight days. It worked: BP's principal problem has, literally, disappeared. "I don't think we'll see any more oil going into the beaches," BP's avuncular new CEO, Bob Dudley, announcedupon taking over. "… And where there is no oil on the beaches, you probably don't need people walking up and down in hazmat suits." In other words: if the oil cannot be seen, the danger has passed.
Sadly, "if you can't see it, it's not there" isn't sound environmental science. Oil enters the food system far more rapidly as an invisible emulsion than as a rainbow slick. Scientists have already discovered the spill's signature inside crab larvae, though the consequences of mixing oil and dispersant with the gulf ecology is uncertain, and won't be fully known for generations. By introducing Corexit into the gulf, BP not only hid its mess, but sowed doubt over the full extent and effects of the damage. This ignorance is no accident—for BP, it's bliss. It makes it possible for BP to argue that it cannot be held accountable for those damages that were not directly related to the spill.
Indeed, Dudley would be a poor CEO were he not to use the lingering questions over the exact amount of damage caused by his company to haggle every possible concession from the government. The federal government's (hotly debated) estimate of the total spill volume amounts to 4.9 million barrels, of which800,000 barrels were recovered. If a federal court rules that the spill resulted from gross negligence, the government can claim civil penalties of as much as $4,300 per barrel, leaving BP vulnerable to a total fine of up to $21 billion. Although he is unlikely to bargain down BP's liability to match the flow rate BP initially claimed was gushing from the well (1,000 barrels a day), BP has excelled in such negotiations in the past. According to the Center for Public Integrity, in October 2008, BP whittled seventeen serious charges of safety violations at its Tesoro refinery in Anacortes, Washington down to three counts, slashing a $85,700 fine to $12,250.
That said, even if the government goes easy on BP, as it alreadyappears to be doing, there are other constituencies ready to make claims. One report calculates the economic cost to be $1.2 billion and 17,000 jobs by the year's end. Some figures are even higher—the US Travel Association commissioned a back-of-envelope study from Oxford Economics, which estimated the losses to tourism alone at $22.7 billion over the next three years. In response, BP is trying to minimize, avoid and obfuscate, settling with claimants for as-yet-undisclosed lump sums in exchange for waiving the right to sue BP, and buying in scientists from Louisiana State University, the University of Southern Mississippi and Texas A&M at $250 an hour for its legal defense teams. After claims from the government and private sector are settled, BPexpects to have some change left in the clean-up fund when the years of litigation come to an end.
We oughtn't to be surprised that corporations like BP behave in this way, committing capitalist acts, externalizing environmental and social costs while internalizing profits. After all, these are the rules of the economic game. But the real reason why BP will likely never see a full tally for its actions lies not in its Machiavellian plotting, nor in its hiding damage and muddying the water with doubt, but in the everyday blindness built in to modern capitalism. Our economic system just isn't set up to measure the wider costs of our activities, and the gulf spill illustrates this painfully well.
Perpetually out of sight in the reckoning of economic damage, for example, are the broader benefits of the gulf ecosystem provides humans. Gulf coast residents draw on a range of services that the environment provides "for free," but which have immense material value. Ecological economists studying the Mississippi River Delta before the spill valued "hurricane storm protection, water supply, climate stability, food, furs, habitat, waste treatment, and other benefits" provided by the Delta alone within a conservative range of $12 to 47 billion a year. The same scholars recently approximated the damage caused by the oil spill as somewhere between $34 to 670 billion, a figure that dwarfs the standard measurements of harm in the gulf. Had these researchers cast their net further, to include the wider gulf's ecology, their figure would be higher still. And then there is the physical and psychological damage done to the communities along the coast. This harm is real and devastating and hard to quantify. But if in normal times, 6 percent of American adults suffer serious mental health issues—a population that earns at least 40 percent less than healthy adults—how will this translate to the gulf, where depression is rife, and where the full mental toll has yet to be counted?
Even in the absence of a devastating spill, the reality is that oil companies are damaging simply in their day-to-day operations. Like the tobacco industry, the oil industry makes a product that, when used according to its instructions, causes great harm. The US government just released its annual State of the Climate report, cementing the findings of human-caused climate change, a phenomenon that Big Oil continues to shrug off, and lobby against addressing. The devastation of the BP spill compounds costs that, in reality, are no less part of the toll, and no less hidden from us. One recent study suggests that by 2030 the global costs of dealing with climate change might be as high as $300 billion a year. These costs will ultimately get paid—just not by the oil industry.
To do a full accounting of the spill—and to look ahead at what comes next—it's worth using a central idea from economics: the notion of "opportunity cost," or "the next-best-thing that might have been done with a given set of resources." So, what is the next-best-thing to a multi-billion-dollar industry, spills and all? To pose the question is to ask what kind of economy we have and want. Evaluating opportunity cost means looking at the existing alternatives and comparing them against one another. And some of those alternatives, on closer examination, don't look terribly different to the present.
A range of powerful groups are already pushing their alternatives to gulf oil. The corn ethanol industry recently seized the chance to wean America from its fossil fuel addiction with a campaign titled "Ethanol: Now is the Time." (Catchphrase: "We feed the world. We can fuel it too.") The National Corn Growers Association's durable solution to deep-sea drilling involves growing food not in order to eat it, but to set it on fire. For this to be economical will require Congress to renew a corn ethanol tax-break that costs taxpayers $6 billion, according to a recent Iowa State University study. If nothing else, the corn industry has chutzpah. Before the oil spill, agricultural runoff from corn and livestock production along the Mississippi was responsible for a dead zone in the gulf the size of New Jersey. No one knows how King Corn's effluent will interact with Big Oil's cocktail, but it's certain that to avoid paying for the mess, one group will blame the other.
A serious consideration of less toxic alternatives will require the sort of public debate that goes beyond questions like “How many people have lost a livelihood from the spill?” to ask what sort of gulf economy is sustainable for the future; to ask not only "What's the cost of the oil spill?" but also "What are the true costs of our energy needs?" It won't be an easy conversation—especially in a country that consumes more of the world's energy per capita than almost any other. But we must put these larger, unseen costs at the center of this discussion, because, just like the oil, the fact that we can't see them doesn't mean they don't exist. These costs are an iceberg: only a fraction visible to our myopic economy, and the rest are hidden, unaccounted for and passed on to "the small people," as BP Chairman Carl-Henric Svanberg has referred to the residents of the gulf coast. Across the globe, already 300,000 people—mainly poor, mostly women—die every year as a result of climate change. This is a debt that we in rich countries have dumped on the global South, the responsibility for which we ourselves have dispersed.
It's not an entirely grim picture, fortunately. BP hasn't managed to disperse all its opposition quite yet. A great deal of organizing, much of it outside the US, is demanding a zero-carbon future and reparations for environmental harm done by the rich to the poor. For these efforts to succeed in this country, the BP spill must be a wake-up call—to re-imagine our economy, our politics and our energy needs, or else to calculate just how much more we are willing to lose.