President Obama gave his first-ever speech from the Oval Office last Tuesday, and it was about the BP Gulf oil leak. The BP Deepwater Horizon oil rig exploded on April 20, and the president has been harshly criticized for waiting so long to take the problem seriously. That his Oval Office speech didn’t happen until almost two months after the accident fanned the flames of such criticism. Beyond that, though, the content of the speech disappointed.
Obama talked about the creation of a $20 billion escrow account funded by BP in a way that made it seem like a personal accomplishment on his part. However, BP never shirked its responsibility, and never said it would be unable to pay. With $70 billion in cash and $240 billion in overall assets, it’s well positioned to handle the financial obligations of the disaster and has said repeatedly that it’s prepared to do so.
As for getting tough on those responsible, no politician will do so and it’s not clear that they should. Whose fault is it, really, that BP and others are drilling one mile underwater? Mine, every time I fly from Tokyo to Denver. Yours, every time you drive to work. Obama’s, every time he accepts money from oil companies. The amount of oil that is projected to leak into the Gulf from this accident is 2-3 million barrels. The US alone consumes 19 million barrels of oil per day, so the total amount that leaks into the Gulf from this accident represents less than four hours of US oil usage.
The companies are down there because we demand that they operate down there. It’s our insatiable appetite for oil and the dwindling supply of it that’s driving companies to more remote sources. This will not change until governments organize an ordered move from fossil fuels to others. My vote is for a nuclear power grid charging electric cars. The market won’t serve that up, though, because oil profits buy politicians who keep the oil economy in place, which generates more profits that buy another round of politicians, and so on. The oil economy might change when campaign finance changes, but don’t hold your breath for that.
It seems, though, that if ever there was a political opportunity to make the case to break free from the oil economy, this accident was it. If ever there was a president who seemed like the right leader for a new kind of energy, Obama was it. Instead, the discussion has turned to “whose ass to kick” and false toughness about making BP pay.
We, investors, are the best clue as to how this situation will wrap up. Did we rush to buy shares of alternative energy companies? If a major shift in the energy economy toward them were imminent, doing so would have been smart. We didn’t buy them, though. We bought Transocean (RIG), an ultra-deepsea oil driller whose shares became ultra cheap. We bought it because we know nothing will change, and we therefore believe its shares will get expensive again.
Moreover, the much-advertised victims of the oil spill, people living along the Gulf coast, are the most ardent protesters against the temporary drilling moratorium. Why? Because so much of their local economy depends on oil profits.
What would have been nice to see from the president is some truth to his campaign speeches about getting the US economy off the oil path. Nobody expects an overnight switch, but supporters of the president of fresh hope had reason to think he’d at least get the ball rolling. He could be discussing job changing programs, for instance, that would help oil industry workers transition to the new energy economy. Instead, he hasn’t been one bit different from past presidents — he even authorized more deepsea drilling just three weeks before the disaster, and has done nothing so far to suggest that it’s the catalyst we need to start the big change we need.
Nothing disappoints more than high expectations gone unfulfilled. Unfortunately they’re becoming the call sign of this presidency.
Disclosure: long RIG
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