The Causes of the Gulf of Mexico Disaster

The explosion and fire at an oil rig in the Gulf of Mexico caused the biggest ecological disaster in American history. The incident, which took the lives of 11 workers and caused an enormous oil spill, happened on April 20 of last year. An official report has just been published in the United States about the causes of the tragedy. Fingers are being pointed at British Petroleum (BP) and other companies that exploited the Deepwater Horizon oil rig.

The 48-page report points to “systematic” flaws that will continue to occur unless oil companies and the U.S. government make important changes. The report, commissioned by President Barack Obama, reads: “The Macondo blowout was the product of several individual missteps and oversights by BP, Halliburton, and Transocean, which government regulators lacked the authority, the necessary resources and the technical expertise to prevent.” One method to increase profit is to reduce costs. This is achieved by improving the production process, which at times implies, contrary to security concerns, simplifying certain controls and procedures. In many cases this involves staff cuts. In 2009, BP’s worldwide savings totaled $4 billion. The reductions in personnel were enormous: the 92,000 employees in 2008 were reduced to 80,300 in 2009.

The report specifies that “BP did not have adequate controls in place to ensure that key decisions in the months leading up to the blow-out were safe or sound from an engineering perspective.” But hardly a year before the explosion, Andy Inglis, head of exploration and production at BP, boasted: “We don’t do simple things. We are prepared to work at the frontier and manage the risks.” Even after the disaster, BP maintained an arrogant tone and indicated that: “The current position is the same as the updated strategy from last year. We are committed in three central areas: extracting oil from deepwater, unconventional gas and improving the recovery of major reservoirs. The world needs oil to satisfy increasing demand and a position that avoids all risks would only increase costs.”

The big companies love to present themselves as defenders of the common good, not something so base as a love for profit. Their declared motivations are usually the creation of jobs or, as in this case, to satisfy the demand for the lowest cost. The BP case is emblematic of the dominant business model in many industries. These oil companies operate in such magnitudes and volumes that suddenly the environment seems to be a secondary factor. Engineers, imbued with a particular sense of omnipotence, usually think that all difficulties are calculable and can be overcome through technology. This experience shows that, once again, such thinking is merely wishful thinking. Be it Exxon, Shell or Chevron, to name the most well-known oil companies, each has a history of disasters.

From a strategic perspective, the cause of the accident lies in the increasing world demand for crude oil. This is the motor that drives companies to increase risks. The demand for oil in the U.S. has increased 35 percent since 1971, while domestic production has fallen 30 percent. As a consequence, imports have doubled to cover two-thirds of demand. The United States has a quarter of the population of China yet consumes twice as much oil. Forecasts for 2025 suggest that, keeping all things equal, demand will increase by 50 percent. That means that the dependence on oil from the Middle East, Caucasus, Africa and Latin America will increase. As a result, political pressures and conflicts in these regions will also increase.