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Archive for the ‘BP’ Category

A Tale Of Two Standards

Posted by Karl Denninger

It’s not often that we get this sort of divergence on the front page of an electronic publication….  First, BP:

May 26 (Bloomberg) — At least one federal crime had indisputably been committed when oil started spewing into the Gulf of Mexico and approached land. Another criminal act became clear when the first oil-covered sea bird died.

Ann goes on to outline the essence of the argument that I’ve been making on this point as well – that there appears to be, at least, criminal negligence here.  There’s a decent chance that a felony is embedded in there somewhere as well.

She finishes with:

And yet, even the misdemeanor crimes we know were committed led to a calamitous result. They could also lead to ruinous penalties to those responsible.

Ok, now contrast with:

“In undertaking financial reforms, it is important that we maintain and protect the aspects of central banking that proved to be strengths during the crisis and that will remain essential to the future stability and prosperity of the global economy,” Bernanke said today in a speech at the Bank of Japan in Tokyo.

This, when we have hard evidence – indeed, bald admissions – that The Federal Reserve (and others, including bank regulatory agencies) have engaged in intentional circumvention and violation of the laws governing banking and The Fed’s operation.

The Fed has no authority to buy anything that does not carry a full faith and credit guarantee.  Yet it has.

The FDIC, OCC and OTS have a black letter mandate to employ “prompt corrective action” against all regulated banks.  Yet they did not.  We even know that in one case the Inspector General of the OTS reported that actual raw balance sheet fraud occurred (back-dating of deposits) and an OTS employee colluded – that is, conspired, with bank executives to commit it.

Sarbanes-Oxley makes uttering a false balance sheet a criminal offense and imposes a duty to know.  That is, “I didn’t know that it was false” isn’t a valid excuse; public company executives are required to know the truth before issuing these reports.

So while we all circle around “hang ‘em high” with regard to BP and the incident in the gulf, which clearly has and will have many billions of impact on our economy and nation, I would like to ask where’s the store of boiled rope for the banksters and so-called “regulators” that collectively imposed several trillion of damage on our economy and nation – and who clearly violated in the law in doing so.

Oil, Oil Everywhere

Posted by Karl Denninger

We’re now about a month into the BP Oil “blowout” incident in the Gulf.

We still don’t know exactly what caused the blowout, but that’s not the important factor from my point of view. 

We know that a gas “bolus” got into the drill pipe and expanded as it rose, and that was the proximate cause of the blast and sinking of the Deepwater Horizon.

What we don’t know is why the blowout preventer failed to close.

There have been several theories and claims, among them:

• The Blowout Preventer’s hydraulic system has one or more leaks in it, and as such it couldn’t close.  If this is true then the question becomes who knew of the leak, if anyone, as it would have caused the preventer to fail routine tests.

• There are also claims that the well failed a negative pressure test a few hours before the incident.  That would imply that there was a problem with the casing integrity (or the cement job done to lock it in place) and work continued without addressing this first.

Let me provide some context here: I live in the Florida Panhandle and in a “worst case scenario” the value of my home is likely to be destroyed.  On April 30th I wrote a piece called “Drill Baby Drill“, and I stand behind it today, even with the increased knowledge we now have.

I want answers to the above two questions, and I want the firms and persons responsible for those two breaches of protocol and common sense (along with safety measures) tarred, feathered and bankrupted, in that order, with every penny they personally and corporately possess confiscated to perform whatever remediation we can.

What I do know is this: A deepwater rig like the Horizon costs about $500,000 per day to have on site and operate.  There was obviously a decision taken by someone that halting operations to pull and repair or replace the blowout preventer stack would cost millions (such an operation would result in significant downtime, of course, during which the rig would be sitting idle) and thus it was not done.

But this does not change my base view, which is that we have no valid alternative to drilling in the Gulf and elsewhere – indeed, everywhere we can find oil and gas.

What alternative would you like? 

Here’s a couple of inconvenient facts for those who say “shut it all down and hang ‘em high”:

It is rumored this weekend that Saudi Arabia’s government is trying to figure out who leaked a document that proves that they’ve been funding Al-Qaida in Iraq.  This is the same nation we send tens of billions of dollars to every year in exchange for oil.  If this proves to be factual then we are in fact funding the very people who blew up our own Twin Towers and killed 3,000 Americans, as well as those who are shooting at our men and women in Iraq right here, right now.  Isn’t it awesome that when you stick that gas nozzle in your fuel tank you’re buying the ammunition, weapons and IED’s that are being used to kill our GIs?

Venezuela, of course, is run by a murderous madman.  Beyond seizing property for grins and giggles he also likes killing people.  You can fund him when you stick the nozzle in your tank, if paying for bullets to shoot our GIs doesn’t tickle your fancy.

Or we can simply crush all our cars.  That’s an option too.  But don’t forget that it’s not just cars, it’s trucks and trains that bring the goods to your local grocery store that you’d like to eat.  They run on that same oil, and since you eat, you are (again) funding the murderous thugs either in Iraq or Venezuela – every time you shop for everything you buy.

These are facts folks, and no amount of “happy talk” changes them.  Nor does the “environmental greenie weenie” stuff change these facts.

We have had and squandered nearly 40 years since the 1970s oil shocks during which we could have put in service hundreds of nuclear reactors and wired every rail line with overhead power, eliminating the need to use petroleum for rail transport and replacing a large number of our base load coal-fired power plants at the same time.  We refused because we were afraid of a nuclear accident.  In exchange for this we have hundreds of thousands of people who have died of asthma over those 40 years aggravated by the coal plant stack output and several oil spills, including the current one.  France, which went the nuclear route, has not had one of their civilians die as a consequence over the same time frame. 

This is called a decision to allocate risk; we went one direction, they went the other.  You tell me: who made the better choice?

The facts are that about twice as much oil is used for gasoline (read: cars) as for the next two largest consumers: distillate (diesel fuel, 2/3rds of which is used for transport in trucks and trains, mostly) and industrial (plastics and other polymers mostly.)  A decision taken 40 years ago to build nukes by the boatload could have replaced perhaps a third of the distillate consumption and some of the gasoline, but little beyond that.  To eliminate our “foreign oil” dependence we would have to get rid of all of our distillate and gasoline consumption.  Cutting industrial use means eliminating a lot of polymer (plastic) use – have a look around your home or office and tell me what it would look like without them.

Fat chance on that.

Oil leaks out of the seabed every year through entirely natural causes.  This is not something we can stop and it has been going on for millions of years.  Yes, this “volcano” is bad, and yes, it is now oiling marshes in Louisiana, but the fact remains that our options are to either drill for oil and gas here or send hundreds of billions of dollars overseas to people who then use that money to murder people – in many cases, our own soldiers.

I choose to drill here, even though doing so comes with risks.  I also demand that the people responsible for violating known and necessary protocols hang for it and the companies they work for be bankrupted. 

Those two demands are not incompatible. 

I ask that people who are driven to emotional and irrational expectations and demands take a look in the mirror and around their homes first.  Come talk to me about halting drilling here when you’re willing to go door-to-door with all the dead GIs that come home as a consequence of our shipping that money to Saudi Arabia, you’ve sent your cars to the crusher, you’re either riding horses or using a golf cart (plugged in of course) to get around, and have ceased buying anything that has plastic or rubber in it.

Then – and only then – do you have a case to make for what you want our nation to do.

Those are the facts, whether they’re inconvenient or not.

The Responses to the Gulf Oil Spill and to the Financial Crisis Are Remarkably Similar … And Have Made Both Crises Much Worse

? Washington’s Blog

The Gulf oil spill and the financial crisis were both caused by excessive risk-taking by industry giants and the “capture” of politicians and regulators by the corporate behemoths.

Moreover, the response to the Gulf oil spill and the financial crisis are remarkably similar.

With regards to the financial crisis, the response has been to cover up the truth:

William K. Black – professor of economics and law, and the senior regulator during the S & L crisis – says that that the government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are (“the entire strategy is to keep people from getting the facts”).

Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980′s during the “Latin American Crisis”, and the government’s response was to cover up their insolvency.

Black also says:

There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well.

PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can:

The current craze in DC policy circles is to create a “systematic risk regulator” to make sure that the country never experiences another economic crisis like the current one. This push is part of a cover-up of what really went wrong and does absolutely nothing to address the underlying problem that led to this financial and economic collapse.

Baker also says:

“Instead of striving to uncover the truth, [Congress] may seek to conceal it” and tell banksters they’re free to steal again.

Economist Thomas Palley says that Wall Street also has a vested interest in covering up how bad things are:

That rosy scenario thinking has returned to Wall Street should be no surprise. Wall Street profits from rising asset prices on which it charges a management fee, from deal-making on which it earns advisory fees, and from encouraging retail investors to buy stock, which boosts transaction fees. Such earnings are far larger when stock markets are rising, which explains Wall Street’s genetic propensity to pump the economy.

The same is true for the Gulf oil spill.

As ABC News notes, the White House allowed BP to suppress video of the oil spill for 3 weeks; and a top oil spill expert says that BP’s use of booms around the spill site now won’t really do anything … and is just an exercise in public relations so that it looks like it’s doing something.

BP is also using dispersants to hide the extent of the oil spill. Specifically, as many commentators note, the dispersants cause much of the oil to sink, so that it appears that the spill isn’t that big. But the dispersants are not only highly toxic, but will also probably make the damage from the oil itself even worse.

Moreover, just as the cover-up about the severity of the financial crisis has allowed Larry Summers, Tim Geithner, Ben Bernanke and most of Congress to kill real financial reform, BP and the government’s drastic underplaying of the size of the spill has allowed BP to skate by without taking emergency actions, such as bringing in booms on an emergency basis, or to undertake more pro-active and creative responses.

And just as nothing has changed going forward with regard to the economy since the 2008 meltdown, nothing has changed with regard to offshore drilling.

For example, since the Deepwater Horizon oil drilling rig exploded on April 20th, the Obama administration has granted oil and gas companies at least 27 exemptions from doing in-depth environmental studies of oil exploration and production in the Gulf of Mexico. And a whistleblower who survived the Gulf oil explosion claims in a lawsuit filed today that BP’s operations at another oil platform risk another catastrophic accident that could “dwarf” the Gulf oil spill, partly because BP never even reviewed critical engineering designs for the operation.

Indeed, the industry and government spokespeople have used the exact same word as each crisis – financial and environmental – unfolded. They said the problem was “contained”.

In both cases, we the people are left holding the bag because the giant companies and their campaign-contribution-buddies in DC are trying to sweep the severity of the problem under the rug, to manage the crisis as p.r. campaigns to protect those who let it happen … instead of actually taking steps necessary to solve the problems, and to make sure they won’t happen again.