by Tobi Elliott

Over eight weeks after the explosion, America and BP are still groping for answers on how to deal with the massive oil leak in the Gulf of Mexico. In President Barack Obama’s address from the Oval office Tuesday night, he vowed to keep fighting “this spill with everything we’ve got, for however long it takes.”

Oil Leak

But how does a country, or even the company at fault, fight such a crushing catastrophe when all the technology brought to bear up to this point hasn’t been able to stop the flow of oil?

BP is still – apparently – working frantically on the matter, as is the White House, but every fix tried has failed. Conservative estimates now put the number of barrels of oil gushing from the underwater well at 35,000 per day, while arguably more realistic estimates put it at 60,000 barrels. A small measure of relief came when BP was able to put a containment cap on top of the well’s riser pipe, diverting about 15,000 barrels per day.

But the vast majority of the oil is still gushing, poisoning the shores, water, wildlife and untold numbers of creatures in the ocean, with tragic consequences that will take years to tally up, let alone repair.

Kind of ironic really, when you consider what a literal picture the oil disaster gives us next to the now-historic economic “fail” of 2008.

Just like the Deepwater Horizon rig, America has a deeply-embedded pipeline of banking systems that runs under the waters of its mortgage and housing market. Just like BP, the pipeline is set up by those with an interest in doing one thing: making money.

And just like the CEOs of deepwater drilling rigs, everyone from the leaders of the banking industry to its consumers and legislators assumed that its hidden banking pipeline was secure, that money was carefully meted out according to supply and demand, and most importantly, that somehow there existed a complex system of levers and shutoff valves if there was a true emergency.

What we have learned through both crises of 2008 and 2010 is that we were not as secure as we hoped. We were shown to be the shortsighted creatures we are, taking risks we don’t understand, with disastrous consequences. We found there was actually no safety shutoff that could correct what became in both cases, an international disaster.

More importantly, we learned that those who own and trade through the banking pipeline, just as BP’s shareholders and those who run the deep sea oil rig, have greater vested interest in what their system produces – oil, returns, or both – than they do in protecting the environment or consumers if something went wrong.

Risky financial practices, such as the buying and selling of toxic packages of derivatives, were highly profitable. According to a report in NPR, U.S. banks made more than $20 billion last year trading derivatives, a risk-trading practice that nearly brought down the world’s financial system.

Highly risky as well, is the practice of drilling deep into the earth’s core. A Dow Jones article in February touted ultra-deepwater drilling as some of the most highly profitable gigs going for oil exploration. “Transocean Ltd. (RIG), the largest offshore drilling rig contractor, saw its revenue from ultra-deepwater drilling jump 32% to $890 million during the fourth quarter from the same period last year. In contrast, revenue from its jackup rigs, which drill shallow water fields, fell 40% to $422 million.” The company’s rigs “are booked through 2010.”

One of Transocean’s contractors is, you guessed it, BP in the Gulf of Mexico. Its ultra-deepwater rig fleet can rake in an average of $486,200 per day (Rigzone, 2010). It’s hard to ignore that kind of wealth for the sake of a risk that may never manifest.

And that’s exactly what Richard Posner, author of the 2004 book ‘Catastrophe: Risk and Response’, argues. It’s impossible for any company or government to measure and allow for all possible disasters. In a Washington Post article Posner writes, “there is a natural tendency to postpone preventive action against dangers that are likely to occur at some uncertain point in the future (“sufficient unto the day is the evil thereof,” as the Bible says), especially if prevention is expensive, and especially because there is so much else to do in the here and now.”

So, it’s logical to put measures in place to prevent risks that are significant enough to pose a threat, or if it’s relatively cheap enough to provision against. But catastrophes with much lower probability rates tend to be ignored as leaders assume that swift corrective action, like lowering interest rates or turning a shut off valve, will fix it on the other side.

At the end of the day, what we need to learn from these catastrophes is that no system is fail- proof – especially when vested interests are deciding which risks they’ll cover, and which are too small to care about. Corporations and governments, legislation and banking systems, all have flaws. All are built by humans, and can fail much more spectacularly than a single human is capable of doing, and with very painful consequences that, more often than not, are borne by you, the consumer.

So it’s up to those who use the systems…

• the consumer,
• the rig-driller,
• the bank client,
• the small business owner,
• the lender and the borrower,

to learn as much as they can about the inherent risks of the systems that govern them.

If we are to learn anything from our very recent and painful history, we should be testing emergency systems before we drill, consumers should read the fine print before they buy, legislators should heed warning signs that are exist, and we all should consider losing our tunnel vision (read: greed for personal and rapid wealth) and start thinking holistically about the world we live in.

Because it’s clear that no one is going to do it for you.