Response to "Technology, complexity, economy, catastrophe", Kenneth Rogoff on the Globe and Mail

Today I read an interesting editorial by Kenneth Rogoff, a professor of economics and public policy at Harvard and former chief economist at the IMF. The original article can be found at "http://www.theglobeandmail.com/news/opinions/technology-complexity-economy-catastrophe/article1588565/". In the article, he makes the claim that in our world today "the speed of innovation seems to be outstripping government regulators' capacity to deal with risks". I believe there is a difference between "can not" and "will not".

He uses the recent BP disaster as an example. He brings up Obama's proposal to expand offshore oil drilling, and advances in deep drilling. What I find interesting, though, is the fact that Obama made the proposal "under pressure from Republican opposition". Obama was formerly very adamant against the Republican slogan of "Drill, baby, drill"; to me, it meant that he understood very well the risks of offshore drilling and could have kept regulations tight. Of course, we know that he didn't, but that is very different from being "unable" to regulate.

Another example of a failure of regulation (but not, once again, the ability to regulate) is the fact that hundreds of millions of dollars are spent on research and development of oil extraction technologies, but only a paltry fraction (in the low tens of millions) is spent on technology used to contain and to resolve an accident such as the one currently being faced by BP. A government imposed mandate of a more balanced annual development budget focusing on both extraction and prevention/containment technology would go a long way in making sure that an event like this does not occur again.

Finally, there are many reports that state BP took many "shortcuts" prior to the accident and that regulators are extremely close to the industry (accepting "gifts" on occasion). This is another example of regulators unwilling to regulate properly.

It seems that (in BP's case, at least) there was no lack of ability to regulate, and that the real challenges lie in maintaining high levels of commitment to actually upholding regulations. On one point we can both agree upon, "we can ill afford to keep getting it wrong."

BP Oil Crisis: The Lesson

As everyone knows, the oil "gush" has been happening for over a month now with estimates of over 19, 000 barrels of oil are being released into the ocean each day, and just recently eclipsed that of the Exxon Valdez spill back in 1989. British Petroleum has tried a variety of methods in failed attempts to "plug up" the leak; ranging from the built in failsafe mechanism (which was aboard the sunken Deepwater rig), to underwater robots, shutoff valves, a mix of "capping" techniques, and shooting everything from golf balls to cement down the leak (which even the managing director of BP admitted that the chance of success was based on "luck"). The only real solution offered is the completion of the relief wells which are predicted to be sometime in August. By then, the impact of the oil will be massive; marine species such as bluefin, sharks, dolphins, and whales will all be threatened, and the fishing industry may be shut down for decades. The effect on the coastline will also be immeasurable as oil becomes entangled in the marshes of Louisiana. With the onset of hurricane season, the oil will be spread even further inland, and currents may carry the oil up into Canada.

Despite the serious effects this event will have on the environment and the economy, many people have spent their time criticizing the handling of the crisis, pointing fingers at, most noticeably, BP, and the Obama administration. I am not defending these two parties, because they are at fault. However the focus now should be the development of technologies and legislature that will prevent a crisis like this from happening again. If the BP crisis has had one benefit, it would be that it is forcing the government to take a hard look at the issues plaguing the industry, issues that they would have wanted to avoid.

Large sums of money are spent annually in the "development of technologies" in the oil industry, but only a minute portion is devoted to handling an accident similar to the BP crisis (are relief wells the best we can do?). Governments have been loosening regulations governing oil companies. Disaster plans are poorly thought out and implemented (the dispersant used is highly toxic and stockpiles are not nearly large enough to combat the BP slick). Obama's moratorium, and it could be argued, all regulations on offshore drilling is merely an olive branch to the public, not a solution.

We need to look forward and start seriously investing in cleaner energy technologies to wean ourselves from our dependence upon oil. Realistically, clean energy will supply maybe 30% of our total energy needs in the beginning, but it's a start, but as long as we see oil as our only viable energy source available to the masses, there will be more accidents. The cost of developing these new technologies pale in comparison to the ecological cost of doing nothing, as we are now, unfortunately, beginning to learn.