President Obama's Oval Office Speech about BP Oil Spill: (and What the Hell Does Jack Welch Know About Keeping A Country from Rioting?)

Since we've been recording this saga since day 1, it only makes sense to embed a copy of Obama's Oval Office response to the spill. For what it's worth, as one of the authors of this blog, I think Obama is doing the best he can. There is so much backlash regarding his response to this disaster, and I understand the overwhelming anxiety and frustration associated with pain that JUST WON'T STOP. I also am very disappointed with some of Obama's other broken promises regarding habeas corpis and maranda rights readings, not to mention Gitmo. I am not going to defend the President because he is "one of ours." I consider myself a Lincoln Republican. But politics aside, all the talking heads trying to use this catastrophe as a rallying point against the President are frankly disgusting. The latest bitching and moaning session by Jack Welch on CNBC is a perfect example of what I'm talking about. How does this guy, who built up his company's financial opacity to the limits before handing the reigns over to his successor at the very moment his company had nothing left to gain, have a right to say anything about Obama or any President's ability to keep the masses from outright strike? Don't get me wrong, I'm aware of the God-like tenor of Mr. Welch in business circles, and I will give the man respect for running GE into and through its most prosperous times in history. However, Six-sigma standards, whereby you get to axe the bottom 10% of your already elite workforce is not an option for the President of the United States. For better or worse, President Obama must keep peace in this country and ensure that the "bottom 10%" of a population that is not pre-filtered does not find meaning in their lives by rallying against the government and the rest of the elite (like Mr. Welch) over something they do not fully understand. Mr. Welch implies that a business man (presumably like himself) is able to handle this crisis better than a politician:

"Here's the difference between a businessman and a politician: Businessmen focus on solutions. Politicians focus on 'who can we blame?'" he said. "We have to be managers right now, not politicians. No photo ops."

Well, Mr. Welch, this is what I have to say in response to you: First off, as of 2008, BP was the 15th largest company in the entire world by market capitalization. So I think it is safe to say that it has some of the best and most qualified "business men" in the world representing them, running the triage for this catastrophe--and as several previous posts on this blog have revealed (consider Lies, Lies, and More Lies: Hey BP, Does It Pay to Not Tell the Truth When So Many People Are on to You?), these same business men have not been all that honest about the extent of damage this crisis is causing; secondly, the way this country works, if you have not noticed, Mr. Welch, is government cannot really get into a private company's business unless they do something utterly wrong. That is, unless of course, the government is helping your profits (consider the Cheney Halliburton Connection). Thus, if business men such as BP and the rest of the execs from the other companies involved in this mess are better equipped with dealing with this mess, then why the heck is it exacerbating further after nearly two months. If you do not want politicians involved then do not cut corners--lest they cause catastrophes that garner public scrutiny--and when a mess occurs be honest, forthright, and throw your entire weight into the problem--as opposed to spending three weeks calculating what the most profitable "solution" to the problem is. Lastly, Regarding politicians focusing on "who to blame" as opposed to "finding a solution," I posit that BP's inability to find a solution has created a much bigger problem than you disgustingly rich CEO's can possibly fathom because you live in a bubble of largess only achievable in the first place because the skilled politicians of this country manage to mitigate the backlash of the people when $hit like this hits the fan. Rather than ripping on the President, Mr. Welch, you should be shaking his hand, thanking him, and offering whatever support you can to solve the problem--since that's what business men do so well.

Full Disclosure: I have owned GE stock in two separate accounts for 11 years and up until about 7 years ago thought of Jack Welch as a God, until I learned about some of the shady business practices and accounting tricks he engaged in while serving as Captain of the falling ship that is GE.

Enough is Enough. Time to Get Real BP (and that Means "Honest")

A Catalog of the Long-term Implications of the BP Gulf Spill

Enough time has passed at this point that as a national and global society we need to consider the worst case scenarios regarding the BP oil gusher. When the top energy adviser to the White House, Carol Browner, says in a live interview “This is probably the biggest environmental disaster we have ever faced in this country,” (CBS’s “Face the Nation”) and the situation is getting worse not better, it is necessary to consider the long-term implications of simply allowing a morally corrupt corporation remain in control of fixing the (ongoing) mess they have caused.

In a worst case scenario Browner explained , "There could be oil coming up 'til August [and…] we are prepared for the worst." The worst case scenario, of course, would be that the gushing well is not able to be capped at all and we will all be forced to wait until BP is able to finish drilling the two relief wells they began working on several weeks ago. As far as I know, however, that does not necessarily mean that the oil will stop leaking completely though either, merely that the pressure pushing it out will be relieved (hence, "relief well"). If I am misunderstanding the net result of this operation and an expert in the field can explain what I am missing, “There is No Spoon” would love to learn a thing or two in the comment section of this post.

Seriously though, have not we been trolled enough already by “Beyond Petroleum?" I think it is time that government resources be used more judiciously and the bill slapped on BP’s treasury desk. In fact, I couldn’t help but think about Bush’s Mission Accomplished fiasco--I mean speech—back in 2003 regarding the successful end of the US-Iraqi war (for those who don’t know, our men and women are still over there).

Please do not get me wrong, I am not so naïve as to think that during the first few weeks after the explosion, the execs at BP headquarters would have been so quick to tell the truth, (i.e. admitting that they didn’t have a clue and needed help from the US government as soon as possible). That is just not how the world works, as the Oil Giant’s biggest investors would be skinned alive if Virgil were to come loose so early in the crisis--don't forget how many politicians have money in oil either (a la Cheney and Co). They needed to buy time. Okay, fine. I get it. Yet, by May 10th we were on our 6th attempt at solving this issue having already been told that the big steel box thing-a-ma-bob contraption was going to work--then it wasn't going to work--uh, uh, yes it is--nope Terry farted again, it isn't. On to plan F comrades: let's stick a 4-inch pipe down the busted steel well pretend like that will siphon off enough oil to call it progress. After three days of failed attempts BP Says Latest Scheme to Halt US Oil Leak Working Well. In fact, if you watch the video on that BBC page you will very quickly be under the impression that all is solved and we can all go home for "it has succeeded," claims the reporter. “Significant amounts of oil [were] being siphoned via this mechanism.” The next day we learned that "BP, is finally getting a handle on stemming the tide of some of the leak. BP engineers have used a pipe fitted into the leaking well head and have been able to divert some of the oil up to the surface to a drill ship." At the time of reading this, I turned to my partner and asked, "Does that mean that if I turn a flashlight on at midnight it's suddenly almost dawn?" On May 19th we learned that the pipe had freezed up due to ice crystals and was no longer having an impact.

On May 26th BP’s effort to plug the hole with “junk and mud” was going as planned

Then it wasn't.

Then BP's Junk Shot wanted not.

Today, June 3, 2010, we learned that the company finally cut the pipe and is preparing to cap it. As a result the stock climbs 5% while the rest of the market goes up less than half a per cent.

For the record, I would not be nearly so hard on the Execs if “[they] really [were] doing everything in their power to fix this thing,” but they just aren’t.

So enough bitching and moaning on my part, I just wanted to refresh my memory a bit on what has gone on thus far so that I might begin to understand what we can expect from this ugliness moving forward.

First, BP will most definitely not go bankrupt. I expect the company will be much smaller in 5 years or so, but after 101 years of paying fines, British Petroleum has figured out how to work the system and then some.


Second, the nearest state to BP's gushing undersea well (42 miles away), Louisiana, has been the most impacted by the spill so far, and as we all know the aftermath of Hurricane Katrina and the horrible response of the then President is ongoing. Unfortunately Louisiana’s pains are about to get more acute as Governor Bobby Jindal said this week that "more than 100 miles (160 km) of Louisiana's 400-mile (644 km) coast had so far been impacted by the spilled oil. State officials have reported that “sheets of oil” are wrapping the precious wetlands and seeping into marine and bird nurseries, not to mention the oyster beds that serve as the economic motor for many small communities there. Sticky sludge stains cover the marsh cane that binds the wetlands together and promises to endanger the wildlife for quite some time.

In Mississippi and Alabama, “tar balls and surface sheen,” have been reported, while last week National Coast Guard officials spotted tar balls on some beaches in the Florida Keys, raising fears that the Loop Current, which sends water and wild life from the Gulf of Mexico through the Florida Straits may have already brought oil from the spill far to the southeast. Apparently, however, laboratory tests subsequently showed the tar balls were not from the BP spill. (Where else would they be from?) Perhaps what is more scary, however, is that Pensacola was reportedly struck by the rich black goo yesterday, drawing the possibility (illustrated in the simulation embedded in the previous post) that if not contained very soon, small bits—followed by heavy streams—of oil could find its way as far north as North Carolina.

DERIVATIVE IMPLICATIONS (more detailed analysis of the impact of the BP oil spill)

FISHERIES— Having declared a "fishery disaster” in the seafood-producing states of Louisiana, Mississippi and Alabama due to the oil spill, the US government has made these states eligible for federal funds to offset the impact on fisherman and their communities of the oil pollution in their fishing grounds.
Louisiana's $2.4 billion seafood industry supplies up to 40 percent of U.S. seafood supply and employs over 27,000 people.

The state provides more shrimp, oysters, crab and crawfish than any other state in the country and is the second-biggest U.S. seafood harvester. As of Friday, the NOAA extended the area closed to fishing in the Gulf of Mexico to 25 percent of Gulf U.S. federal waters—an area covering 60,683 square miles (up from 20 percent previously, with a warning that more closures should be expected. Mind you, all of these economic effects are for a single state, currently receiving a lot of attention. I can only imagine the more subtle effects of this crisis.

WILDLIFE
As reported, Oil—in thick sheets, surface sheen and tar balls--has come ashore in Louisiana wildlife reserves like the Breton National Wildlife Refuge in the offshore Breton and Chandeleur Islands, and the Pass-a-Loutre refuge further to the south. Large amounts of methane gas has also been released from the source having an unseen/unknown impact. However, during the 43 days since the spill started, wildlife officials report that 491 birds, 227 turtles and 27 mammals, including dolphins, have been collected dead along the U.S. Gulf Coast, according to an update released on Sunday by the oil response unified command.

TOURISM
Tourism operators in Louisiana, Mississippi, Alabama and Florida-- from hotel owners to restaurateurs and boat charterers -- have reported cancellations as a result of the oil spill.

From HotelNewsnow.com we learn that “Tourism officials and hotel operators in Gulf of Mexico coastal regions say they are struggling with occupancy and reservations, but some areas are suffering more than others.”
[…]

We have had some cancellations. It is hitting the beachfront properties hard and the casinos have seen some impact … and the charter boat companies,” said Richard Forester, executive director of the Mississippi Gulf Coast Convention and Visitors Bureau in Biloxi. The timing is unfortunate, since many hotels and casinos had been experiencing an uptick in business earlier this year as the U.S. economy started to improve, he added.


SHIPPING

The National Oceanic and Atmospheric Administration said on Friday it has begun surveying a new ship anchorage site at the mouth of the Mississippi River for ships to undergo inspection and oil decontamination before entering ports. This is a subtle if significant development as we are beginning to see the outlier impacts of the BP spill moving forward.

U.S. authorities are anxious to sustain Gulf shipping operations as the Mississippi Delta is extremely vital to U.S. exports and imports. NOAA says the Lower Mississippi River ports export over 50 million metric tons of corn, soybeans and wheat per year, more than 55 percent of all U.S. grains inspected for shipment.

REAL-ESTATE
If the bursting of the housing and commercial real estate bubble wasn’t weighing on the real-estate already, it is hard to believe that anyone would desire to buy up oil-front property. This particular point might seem far off at the moment, but remember that the source of this oil is over 1 mile below the surface of the water. It will take time, even after the oil well is successfully and completely capped, for all the oil that comes out, to find its way to the surface.

OIL INDUSTRY
There is likely to be a significant impact to the oil industry moving forward for a number of reasons. The most obvious will be the immediate cost to BP to clean up the physical mess—estimated by Credit Suisse to be 37 Billion—but that does not include what it will take to repair their image after this colossal crisis. The expectations of these profit losses has not only brought down BP’s market value, but the entire oil industry as it is a major component of the S&P500 and nearly all energy indexes. Also weighing on the industry are expectations of new costly regulations that will be put in place to make sure this never happens again. The end result amidst a continuing debt crisis in Europe is more strain on an already weak recovery.

Pay No Attention to the Oil behind the Curtain: the Cheney Administration's Perfect Execution

Behind the excitement associated with the debt concerns of various countries in Europe, allegations of fraud against certain Wall Street titans, the over-heating of the Chinese real-estate market, and of course the record price of gold, there remains a tedious War Against Terror, that has finally dragged on long enough for the majority of ADHD Nation to stop paying attention. Meanwhile, it seems the success of the oil auction in Iraq early last year was timed perfectly, creating a windfall for American oil services companies Halliburton (HAL), Schlumberger (SLB), et. al., just before the market cycle begins to thaw and the stronger dollar begins to deplete the market-exchange value of oil (crude is hovering around $76, down from $87 two weeks ago). Having committed to a drilling backlog of 2,500-3,000 new wells per year for each of the next six years as well as to the development and maintenance of the pipeline and shipping terminal infrastructure that will support this massive number of new wells that will be coming online throughout this time period, it appears that the Chaney administration will have indeed succeeded in making Iraq the world’s largest oil exporter (not to mention putting a solid revenue stream in Halliburton's back pocket). The total value of these contracts may reach as much as $60 billion over the next six years, generating $1 billion in new revenues for each company per year.

Two offshore terminals are currently under construction already (first reported here back in 2009), and another two are scheduled to begin by 2013. Upon completion of all four, oil production in the country will go from the current 2.5 million barrels a day to an awesome 12 million barrels per day by 2016. [Official EIA list of top oil producing countries as of 2008]

Iraq’s oil production peaked at 3 million barrels per day in 1979, and then dropped dramatically after it invaded Iran. Saddam did very little to help the ailing situation thereafter, sucking and stealing what little financial nutrient remained from the teet of the severely broken oil fields at the expense of his own people. Year-end earnings reports from every oil engineering company involved in the region reported dismay at just how poor the state of Iraq’s energy infrastructure is after 40 years of neglect, essentially proclaiming that it all has to be rebuilt from scratch. Granted, I try to keep these proclamations in perspective—after all, common sense tells us not to ask a barber if he thinks you need a haircut. Nonetheless, SEC regulations do not permit falsification of facts of any kind in financial statements, and this is one area of government that is fairly well regulated. In the end, if the new Iraqi government can provide the necessary infrastructure (or at least the funding for American and European companies to build it) and political stability necessary to turn Iraq into another Saudi Arabia, we could very well be witnessing one of the largest changes to international trade in a great number of years as it will dump an incredible supply of oil onto the market, essentially putting a long-term cap on dollar denominated oil prices.

Flashback 8 years, and we can see why anti-war activists were the only voices confronting the feeble and unconvincing arguments that were allegedly holding up the United States’ declaration of war and the right to invade Iraq. Early in the planning of the war there was near-open discussion about the US’s ability to reclaim the cost of the war using newly freed oil exports; hence, Iraq’s oil fields were never targeted during either gulf war—well, at least not by the US.

Could it be that much of this philandering stock market entertainment and even the BP oil spill off the US coast is really just a big sideshow meant to distract us from the significant events taking place in the background? Come to think of it, back in 2002 wasn't Saddam Hussein threatening to begin only dealing Iraqi oil in Euro? Funny the Euro is imploding as I write this, down to 1.23354 from an intermediate high of 1.5141 four months ago. It seems the pieces are just falling into place. If I were rooting for the oil mongers and pandering politicos, I might be inclined to say "well done sir! Talk about planning to perfection."