The Gulf Oil Rig Explosion and Your Personal Finances

April 30, 2010 by  
Filed under Fools of Finance

What has happened from the gulf oil rig explosion and is about to happen to the Louisiana coast is going to cost all of us. It won’t be pretty but even Mr. ToughMoneyLove is disturbed by what is happening there.

First, the oil rig operator did not have a remotely controlled device to shut off the well in case of an accident. Many other countries with off-shore drilling require them. Why didn’t we? So we will see more regulation of existing off-shore drilling, adding to the expense and ultimately, the cost of oil to us. Oil companies and their drilling partners are like Wall Street. They won’t do the right thing until their risk-taking backfires and causes government intervention. It’s their own damn fault.

Second, the U.S. government will be spending billions of taxpayer dollars on oil spill abatement and remediation. We don’t have billions more to give. More taxes and more inflation pressure are sure to follow.

Third, the government may declare a temporary halt to all gulf drilling to assess safety and protection issues. That will generate a production shortage and, again, a there may be a spike in retail gasoline prices.

Finally, the forces aligned against increased off-shore drilling have had their case made for them, in the worst possible way for the pro-drilling crowd. Loss of human life followed by an environmental disaster. Despite recent pronouncements to the contrary, I just can’t see President Obama now giving the green light to more oil rigs off our shores.

Electric vehicles here we come.

Do you know what is ironic and a problem for the anti-nuclear energy crowd? Based again on recent events, nuclear power production continues to be safer than oil or coal. Can we please go there?

Oh, and I don’t want to hear any more whining about wind turbines from those folks on Cape Cod. “Not in my backyard” doesn’t cut it anymore.

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14 Responses to “The Gulf Oil Rig Explosion and Your Personal Finances”
  1. Rick Beagle says:

    “Oil companies and their drilling partners are like Wall Street. They won’t do the right thing until their risk-taking backfires and causes government intervention. It’s their own damn fault.”

    Rick Beagle

  2. MasterPo says:

    This is the first major oil spill in the gulf I can remember. It was inevtiable to happen. Same as Exxon in Alaska.

    All this is not without risk of some kind. If someone was clearly negligent they should be rooted out.

    But otherwise, that’s the definition of “accident” in a high risk undertaking.

    ps- So where do you think all the electricity for this cars will come from??

  3. averagejoe says:

    Went to fill up my car this morning. Gas shot up to $3.13 a gallon. Yesterday (other car) it was only $3.03. Only? Only? A few short weeks ago it was only $2.79. I can cope up to $4.50 (as I did the last time) but after that, who knows?

    BTW, it would have cost BP only $500,000 to install the remote cap emergency closure BUT BP didn’t want to spend the money. This is NOT the first time BP had an ‘accident’. I wonder how much the savings of $500K will cost BP now? And all the rest of us?

    America is broke. And we know, as with all financially strapped people, just one little major ‘accident’ can send them over the edge. Where is the government going to get all the money to fix this mess?

    Maybe we’ll sink into a depression after all.

  4. TMN says:

    They damn well better get the full cost back from BP. Break up the company and sell off the pieces if they have to. It’ll be a good lesson for anyone else who thinks they can coast on safety measures while raping the commons for profit.

    • Rick Beagle says:

      Finally we have something right and left wing can agree on. I also think they need to compensate for the billions that will be lost in tourism, fishing, and other coast dependent businesses.

      It is time to understand the full cost of this type of activity (as MasterPo stated, there are risks inherent to this), and weigh that into our national debate. 10 years worth of environmental damage predicted – good-bye businesses that depend on a healthy environment to sustain them! How many billions does that lose us versus the gain of one oil platform?

      By the way, why do we have people suggesting that this was caused by environmentalists?

  5. MasterPo says:

    Great idea!

    And the next time there’s a plane crash force the airline to pay for the rescue and clean up too.

    And the next time there is a gas leak causing a fire make the gas utility pay for the fire fighters and clean up.

    And the next time a car runs someone over make sure the auto maker pays all the hospital bills.

  6. kitty says:

    “They damn well better get the full cost back from BP.”

    I think BP already agreed to pay – as they should.

    “Break up the company and sell off the pieces”
    Well this will be a bit counter-productive, don’t you think? You’ll get a lot more money from BP that is working than from sale of the pieces. But people who like to penalize the guilty above all else, don’t really care about these things, right? Let’s get blood – and who cares if hundreds of thousands of innocent employees get hurt in the process – even if it means that you’ll lose.

    I am actually quite sick of people who view a company – be it BP or Goldman or any large corporation – as a single person. A privately owned company has an owner that is ultimately responsible; a publicly traded company has a bunch of shareholders who are clueless (for the most part), a board (ditto), a CEO, executives and many employees. Yes, some people in a corporation are responsible; yes some of the executives are responsible and the CEO is ultimately responsible. But the vast majority of employees work in completely different departments and have absolutely no relation or knowledge. So sure, let’s break up the company, fire hundreds and thousands of people; the CEO will nicely retire, guilty parties probably have money too.

    How about that – yes BP has to pay. If there is criminal negligence on somebody’s part – persecute this person. If there is simply bad decision/incompetence – let the corporation deal with it by firing the person or whatever. But don’t go after innocent people to prove a point.

    • TMN says:

      “But don’t go after innocent people to prove a point.”

      I’m sorry, but you missed the point. I notice you conveniently left of the “if they have to” section of my original statement, which was kind of important. I’m not saying they should break up the company out of vengeance, I’m saying if the company doesn’t have enough free cash to pay for the damage they’ve caused then they need to be dissolved instead of let off with a slap on the wrist.

      As for “don’t go after the innocent people”, I strongly disagree. Those people made a choice to work in non-renewable fuels. They tacitly encouraged the company to continue in damaging behavior by continuing to work for them, and each and every one of them reaped the benefits of the company ignoring the future negative consequences of their collective actions. You don’t get a free pass to profit from a small group of people acting irresponsibly just because you aren’t in charge of the group, nor do you get a guarantee that your job which depends on pillaging the commons and spewing poisons into the environment will still be around tomorrow just because you put on a sad face and act like you didn’t know what was happening. They chose to work in that industry, their company paid them with money that should have gone to safeguard the environment, and they’ll be out of a job if the resulting damage is too much for the company to absorb. Maybe they’ll think about the long term implications of their choices while they’re in the unemployment line.

  7. MasterPo says:

    TMN – *IF* it can be proven that BP acted in a way contrary to established standards of the industry sure go after them.

    If BP followed all the established standards but you don’t like the standards, get them changed. But don’t punish someone for doing what is expected after the fact.

    But oil drilling *IS* a risky enterprise. That’s why it’s called an “accident”. Don’t give me the BS that “all accidents are preventable”.

    So now we punish the employees??? That’s got to be joke!

    Why not just have a class action law suit agains BP shareholders too while you’re at it? Afterall, don’t the shareholders elect the board and officers who make the decisions? So aren’t BP shareholders responsible too? Shouldn’t they be made to pay for the actions of their company as part owners? I’ll be waiting for my court ordered judgement…

    • Rick Beagle says:

      Part of me believes that you are being argumentative just for attention sake, because your position is simply indefensible and contrary to your previous posted opinions.

      1) You are right, this is a high risk venture much like many others. If I were to lose money as a shareholder from participating in a high risk venture, it would not be my expectation that the government (taxpayers) would be responsible for my loss.

      2) If the business is not responsible for this calamity, and therefore shouldn’t bear the economic burden, then who do you suggest should?

      3) Is your change of heart possibly related to your discovery that this “accident” would have been prevented if Bush/Cheney had not reduced required safety measures and required equipment (that arguably would have prevented this “accident”)? I know you are a big fan, but honestly, the Bush dynasty is a gift that just keeps on giving.

      4) Finally, there are a number of precedents where corporations are held accountable for their “accidents” even if no corporate wrong doing is proven – mining, air carriers, oil companies (Valdez), etc.. Why do you suggest we treat BP differently?

      Rick Beagle

  8. MasterPo says:

    The Exxon Valdez was a very different matter. As I recall (too much a fat, lazy American to Google the story) it turned out the ship Captain was drunk on duty. If similar can be proven here – that someone was intoxicated at the controls or otherwise knowingly not at full performance – go for it. But I haven’t heard any thing yet like that.

    Oil drilling IS a very HIGH RISK business. And a VITAL national business.

    Don’t mix “responsible” and “accountable”.

    Yes, BP is “accountable” for the accident. It was their well, their operation. But “responsible”, who knows yet. I’ll wait for the final determination of what caused such an explosion.

    You can take over BP and sell it piece by piece at auction and it will never cover the full cost of the clean up. All you’ll end up doing is costing thousands of people their jobs and hurt the national economy and security.

    BP shouldn’t be allowed to just shrug their shoulders and move on. But something like this can’t be controlled by a single business. Isn’t that why we have (supposed to have!) an EPA, CG and other government bodies with plans and equipment ready to go??

    • Rick Beagle says:


      You really ought to read my post again (perhaps slower) and then your response…. Wow, way to fail.

      As to the EPA, CG, and other government agencies having every tool possible to address “accidents” like this I ask:
      1) who do you think would pay for that?
      2) are you actually proposing bigger government agencies in lieu of corporate responsibility?
      3) speaking of corporate responsibility, why such a strong desire to give these folks a pass?

      The Beagle

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