ΒιΆΉΤΌΕΔ

It's a nerve-wracking countdown for BP this morning
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Pretty nerve wracking for us listening to you on TODAY this am. You sounded exahusted. You've been working hard since your return Robert; it's time for a day off. Then you can come back with your analysis of the report.

Morning Robert,
I hope this report is a good analysis of what went wrong and I hope that all parties who made mistakes admit their mistakes and accept their contribution to any negligence claim. My worry is that Transocean and Halliburton (hardly a bastion of good corporate governance), will still try and solely blame BP and not accept any liability themselves. The best solutions are where all parties accept their contributions to an issues that has happened and where all parties learn from their mistakes. Sadly, we rarely get that outcome in any industry.

Nothing can be perfect in systems. I am looking for what disaster avoidance, containment and recovery schemes were in place and whether they were regularly tested or simulated. Robert is correct in saying that what BP (and all other organisations with contractors performing the functions of the 'parent') cant do is outsource responsibility. Compulsive privatisers to note.

Time for the lawyers and PR men to get their snouts in the trough.

I think BP will try and do the honourable thing here and get done over by the US government and corporates who are involved. BP's shareprice has recovered somewhat but as the US lawyers get their hands on the report

Could this be an end to the trend to outsourcing everything when it is proved that you cannot outsource ultimate responsibility?

Outsourcing has always been driven by reducing costs - sooner or later that results in a cut too far and 11 people have paid the ultimate price for that.

207. At 11:04pm on 07 Sep 2010, striped-pad3 (from yesterday)

"I've already answered it several times. You always ignore it.
For example, allow me to refer you to comments 144 and 154 on a much earlier blog:
/blogs/thereporters/robertpeston/2010/01/what_obamas_bank_reforms_reall.html
"

Sorry I miss a few - but you should be able to work out my response from other posts.
I think you said.....

"1. They match lenders to borrowers more efficiently than the lenders and borrowers could do by themselves. For example, the capital of a depositor in London can be lent to a borrower (whom he does not know) in Birmingham who is able to use it more efficiently than any of the depositor's acquaintances."

Efficiency of lending? - well it's a new one I'll grant you, but there is no tangeble value added by the bank in this efficiency. The transfer of funds is not a 'value added process' - and yet the bank charges for it. The borrower is in fact restricted by the bank as they have already attracted all the investment through offering savings. Without banks people would invest in enterprise directly and there's a good chance they would invest locally - not US mortgages - but local businesses they can see and believe in.
What you're saying is that bankers are automatically better at assesing the state of a loan than a saver.....so how do you explain the numerous loans made to companies, citizens and the American CDO market which were clearly poor investments?
In addition, what price on this 'efficiency' - are the bonuses paid to bankers actually reflective of that efficiency? - I think not.

"The benefits of the resultant increase in capital can be shared among the borrower (who provided the labour), the depositor (who provided the capital), and the bank (which enabled the efficient loan)."

...so what this is, is a confusing way of saying "the bank gets to take a share of the productive wealth creation merely for providing someone elses (savers) capital. Again I ask, where is the wealth created in this process? Seems like more wealth transfer to me - a classic 'shaving of wealth' carried out by the bank.

"2. They assess the risk of default better than a lender can (or lose their own money if they can't),"

Oh yeah? - banks, bailouts, CDO investments - are these examples of banks asessing the risk better?

"and also pool risk,"

Pool also means multiply in this case (which is why the whole system nearly collapsed)

"so that the lending of capital can be done in more marginal cases than if a lender could only lend to his own acquaintances. (A lender lending directly to a borrower would want a higher rate of return when risking the whole amount lent, and the borrower might not be able to afford this). More capital therefore gets used for productive purposes."

...but this only works on the assumption that those savers (lenders) are actually reducing their risk. The truth is they aren't - as the savers of Northern Rock discovered in 2008.

"This is genuine wealth creation, in the same way as creating a more efficient means to transport perishable goods from a producer to a consumer is wealth creation."

No, the wealth creation in this example above is the labour (and intellectual effort) that goes into finding the more efficient method of transport, and of course any labour which goes into the efficient moving. In case you're still living in victorian times I need to warn you that now we have computerised money transfers meaning funds can cross the world in a nanosecond without any cost.

...so why do banks still charge for this service? The matching of saver to borrower is still being charged for - but the cost is virtually nil. Your theory is dated pre-electronicc banking and might have held weight when the banker walked from town to town gathering savers and borrowers - but now it doesn't happen.

For all your bravado you seem to be simply regurgitating the same capitalist argument but with slightly longer words. There is no value in exchange of goods - only the presumed scarcity appears to 'create value' but the reality is this is merely an abuse of position.

There is no wealth creation in the examples you have given, and even if you argue there is value in the joining between saver and borrower - this value certainly doesn't match the huge profits banks make for this service all over the world.

Now that I've cleared up your confusion about wealth creation - maybe we should discuss the next failure of Capitalist thinking which has directly led to BP's troubles.

Outsourcing parts of the business may look cheaper on paper to the bean counters - but the parent company still has to manage that relationship.
As the contractor's goal is to take the parents cash but reduce it's costs to a minimum (to increase it's profitability) - this means contractor and parent are pulling in opposite directions.

This leads to either a failure (BP - Transocean) or the parent company ends up absorbing additional costs as it's staff have to 'manage the contractor'
Anyone who has worked with outsourcing at the lowest level will know exactly what I mean.
It's a false economy - but the bean counters are too stupid to work this out. It's been going on since outsourcing was invented - and it continues to wreak havoc everywhere that tries it.

Unfortunately as the prime in this operation, BP is ultimately liable for it's operations, regardless of how it has sub-contracted services. Even if blame could be attributed specifically to a transgression by Transocean or Halliburton, BP cannot escape culpability by virtue of being responsible for the venture whether through whole, joint, or limited liability. The legal wrangling that will go on underneath any case of negligence brought against the company is another matter, and should BP be charged I would imagine substantial litigation between BP and Transocean/Halliburton in an attempt by BP to mitigate costs.

If BP is exposed for having cut corners deliberately however, regardless of whether it was for cost-cutting reasons or innocently, then I fear the repercussions for the company will be dire. It will likely result in the largest case of gross negligence yet, and we can say goodbye to one of the largest contributors to our economy (and of course our pensions). I'd also wager that the other oil giants will be itching to get their own lawyers pouring over this report, as any hint of a compromise in safety on BP's behalf will light a giant beacon for a potentially huge, but cheap acquisition.

I have every sympathy for those who lost their lives in this disaster, things do go wrong and accidents do happen whatever procedures are put in place it is a fact of life.

However the Company directors and the politicians who have organised the industry and permitted the firms to grow so huge, such that when they fail (even without malice aforethought) they can cause the whole country to worry about their pensions or national solvency. I have nothing but scathing thoughts as to our ability as a species to manage our policy decisions correctly.

It is a similar problem to the banking crisis whereby the companies have become bigger than individual countries ability to manage the risks that they take during the course of their business activities. [sic Iceland], but potentially the UK.

Standard Oil was broken up when it got too large & powerful, there should be an international agreement to restrict the power (or size) of all firms to a small fraction of the host nation's GDP.
There should also be protection of smaller firms against risks of hostile takeover, or maybe the voting percent should be high ~(90%+) to prevent these mergers taking place.

Globalisation means that in future the UK will reduced to playing a small bit part player in the future of world capitalism, it was perhaps an anomaly that for 200 years a small wet & windy island occupied a prominent position anyway; whilst surrounded by continent sized economies of USA, Europe, India, China, Brazil & Russia.

It's a dog eat dog world out there, the immediate problem is that we have to beware of American lawyers trying to line their pockets at our national future tax income (BP's corporation tax) expense.

@ 2. At 08:43am on 08 Sep 2010, Sam_From_Hendon wrote:

> The best solutions are where all parties .. learn from their mistakes.
> Sadly, we rarely get that outcome in any industry.

Especially not the banking industry, eh?

@ 6. At 09:24am on 08 Sep 2010, jan wrote:

> Outsourcing has always been driven by reducing costs - sooner or
> later that results in a cut too far and 11 people have paid the
> ultimate price for that.

The banks also tried to outsource risk (using derivatives) and destroyed
the world's money system.

BP could afford to pay for its mistakes, but banks were too feeble
because bankers had sucked them dry.

It's the second biggest oil spill in US history, the biggest is:

If Halliburton and Transocean do try to wriggle out of their responsibilities, will other oil companies still want to deal with them?

Eleven people have been killed whilst at work.

A horrible death in an explosion is far, far worse than any humiliation.

BP has no choice but to stand up and take their medecine. This is the only right course going forward.

This will be so much more dignified than the behaviour seen so far from their two US contractors.

2. At 08:43am on 08 Sep 2010, Sam_From_Hendon wrote:

"I hope this report is a good analysis of what went wrong and I hope that all parties who made mistakes admit their mistakes and accept their contribution to any negligence claim. "

Like we had in the finance world following the near collapse of the entire banking system?
I wouldn't hold your breath - corporations have a habit of covering up the truth - it's bad for business you know.

I'd like to see a report into the science behind the miraculous 'oil evaporation' which was a worlds first event of it's kind and never been seen before - and yet nobody seems interested in this natural phenomenon.

Surely such an incident needs thorough investigation so we can reproduce it next time there is a major oil spill - I mean it's simple common sense surely?

Concentration is on BP and this report but attention is being diverted away from the much larger problem which is the level of energy consumption in the USA and the increasing, almost hysterical desperation to win oil, no matter what the risk.This is almost a new industry with unknown risks and,in my view,even when there is compliance with all existing safety measures this business is as risky as venturing into space. We are running out of oil and Govts. across the world seem to be in denial but if they do not prepare then the probable first economy to collapse will be the USA.Claimed existing resources look to be fantasy and the possibility of Oil Shock and the lack of preparation puts all investment across the world at risk. As a side issue I suspect that the American Oil companies were the first to lobby for the release of the Lockerbie bomber and that this is why they will not release the information about the negotiations with Scotland.

8. At 10:10am on 08 Sep 2010, Turbulent_Times wrote:

"If BP is exposed for having cut corners deliberately however, regardless of whether it was for cost-cutting reasons or innocently, then I fear the repercussions for the company will be dire."

...but notably not for Lord Brown who was the architect of this outsourcing model.

Accountability = 0

Where there is no accountability, recklessness is guaranteed to follow.

9. At 10:12am on 08 Sep 2010, PaulattheRocks wrote:

"It's a dog eat dog world out there"

...only for dogs - I am human and therefore matters of the canine barbarism do not concern me.
Maybe the answer is for corporations to stop thinking like and acting like dogs?

How long before the BP trolls arrive and start professing the innocence of BP and how the company's survival is in our best interests - which means it should be allowed to do what it wants?

...are they on a half day or something?

Someone in the BP PR department needs sacking.

Be careful in knocking a whole industry from a single incident, as with the banking crisis there are good guys and bad guys. Whilst there are always ways to improve I think you will find that there are widely different approaches to deepwater drilling within the industry. BP may not be that high up the well integrity scale. It is a complex technical issue and my experience to date is that most commentators do not understand, do not take the time to understand and are content with passing on virtually meaningless summaries of work done by one or another involved party. Take your time in making conclusions.

What is going to become blatently clear, is that the US oil industry is going to be shown up for having the same if not less oversight as the banking industry....lives have been lost in this disaster and they cant be brought back,thank your lucky stars that tougher rules are made and applied to the nuclear industry , in this country at least........

We need , honest people in Government who wont sell their soul to the corporates...At every level we see lax legislation,poor accountability and that is what the governments role is to ensure that we the people are protected.....it isnt happening ....

The whole system is rotten to the core, but it has been shown up in spades by this disaster, it will happen again for certain, if change doesnt happen....

20. At 11:10am on 08 Sep 2010, hccrab wrote:

"Be careful in knocking a whole industry from a single incident, as with the banking crisis there are good guys and bad guys."

More like bad guys and very bad guys...

"Whilst there are always ways to improve I think you will find that there are widely different approaches to deepwater drilling within the industry."

...and competition 'law' dictates that as those with looser attitudes are nearly always cheaper - those who have stricter and safer policy will be swallowed up or go bust as they are not 'efficient'

...it's just another example of how markets select the 'best' for markets - but not neccessarily the best for everyone else.

"BP may not be that high up the well integrity scale. It is a complex technical issue and my experience to date is that most commentators do not understand, do not take the time to understand and are content with passing on virtually meaningless summaries of work done by one or another involved party. Take your time in making conclusions."

...isn't that the same excuse the finance industry trundles out? - i.e. "it's complicated, you won't understand, you have to trust us because you don't know any better"

Sounds like a wishwash of junk to me - I mean we have people with PHD's on here - what makes you think that extracting oil from under the ocean is something they can't intellectually handle?

Robert,

Exemplary coverage, as ever.

And a curious subject.

If morality is interlinked with economic behaviour (as BP are indeed learning, albeit the very hard way), then what does this mean for the city, big business etc moving forward?

Normally, BP et al would be perceived - rather distastefully - to 'write off' costs (as seen in their accounts) incurred as a result of moral obligations. Whether it be costs / compensation as a result of deaths, accidents or other.

If the previous levels of economic write-off is now perceived to be woefully inadequate and unacceptable, then the absolutely critical question: which business direction should BP take? If the behaviour perceived as acceptable over the past 30-odd years is anything but, then how should BP re-invent itself, and manage the 'risk' (cost of failure) of its operations?

I await your next article!

--

I imagine there will be more than a few red faces in the US government as well.

e.g. Contingency plans submitted well before the accident detailing how they would look after the Gulf of Mexico wildlife in case of accident. The list of inhabitants involving those of a more polar inclination. BP did not bother with proper plans and the US government did not give a damn enough to make them.

#15. At 10:37am on 08 Sep 2010, writingsonthewall wrote:

"I'd like to see a report into the science behind the miraculous 'oil evaporation' which was a worlds first event of it's kind and never been seen before - and yet nobody seems interested in this natural phenomenon."

The free H2O content could evaporate making the oil thicker and it is possible the oil could become near soild and sink but highly unlikely in the timescale given it was floating on yet more H2O. Most probable is natural deterioration of the base molecular structure by sea water ingress through the motion of the sea, commonly shouted from the rooftops as "The slick is breaking up!"

Unlike common belief oil and water does mix in the right conditions of heat, non-saturation and stirring (wave motion) - eventually! It is also broken down by micro organisms when exposed to the elements. To be honest both processes are extremely slow absent of extreme conditions.

There are 7B people so 11 deaths really is nothing, it happens. The oil lost is much worse as that will never be recovered as it requires dead dinosaurs and millions of years and we're short on both.

I have been following this blog since 2007 and I have to finally comment and register my disgust at what has just been posted by lindsay_from_hendon. I am aware you are a troll, I'm aware I should not feed you but that comment is beyond depravity.

Anyone who could post such a cold hearted opinion is IMHO beyond contempt.

I pity you.

#26. At 12:01pm on 08 Sep 2010, Lindsay_from_Hendon wrote:

"There are 7B people so 11 deaths really is nothing, it happens. The oil lost is much worse as that will never be recovered as it requires dead dinosaurs and millions of years and we're short on both."

Don't you know Dickie Attenborough has cloned dinosaurs from an insect stuck in amber, and with developments in the theory of exponential bending of time and hey presto - we've struck oil.

26. At 12:01pm on 08 Sep 2010, Lindsay_from_Hendon wrote:

"There are 7B people so 11 deaths really is nothing, it happens. The oil lost is much worse as that will never be recovered as it requires dead dinosaurs and millions of years and we're short on both. "

Well I sincerely hope you're a wind up as you've marched over the lines of decency with your claim that 11 lives don't matter so long as the oil keeps flowing (and I noticed you're bothered about the lost oil and not the damage to the environment)

I fear your comment will propel you to levels of unpopularity on a par with Government.

I also presume you won't mind when you're hung from the rafters as a collaborator of fascist corporations - I mean it's social progress after all and your life is insignificant in that - surely?

This comment was removed because the moderators found it broke the house rules. Explain.

...from one failed corporation to another...

/news/business-11224398

Is nobody at the ΒιΆΉΤΌΕΔ aware that my council (and you'll have to work out which one that is) is currently in legal dispute with this failed service provider over works carried out in the past?

Maybe it's because the beeb stopped investigating stories and decided to print PR statements instead.

Now someone explain to me the process of administration - who is going to foot the bill and pay up for the incomplete and inadequate work undertaken by Connaught in the past - now that it looks like it's finished?

Don't forget folks, local councils won't have the money - they're expected to cut their budgets over the next few years - they can't pay to have the work re-done!

Real ΒιΆΉΤΌΕΔ journo's might want to trawl through the records of the LVT or now RPTS (Lease valuation tribunal) (Residential something something service) to see how many cases brought by residents were where the work was undertaken by connaught.

...if you look carefully you'll find my case - which I won of course - because this failure of outsouricing - just like BP - has been doomed for a very long time.

Oh there's going to be a lot off trouble ahead - and neither Government or local councils can see this coming - they're too busy looking for things to cut. TFL could absorb the cost of Tube lines and Metronet - LA's in London are not going to be able to do that - so what happens next?

This is exactly why even true free markets can never work - the consequences of 'allowing businesses to fail' cannot simply be solved by 'moving elsewhere' in many cases. It's a shame capitalist supporters are too stupid - or greedy - to understand why.

Forget decency, truth and honour, now we’re going into litigation. Whatever is written in a report will be taken down and used as evidence by a twisted lawyer to extract cash.

The contracting tree has Federal Government at the top, then BP followed by Transocean, Haliburton...

However, in the money to power ratio list, BP is at the top. That makes them number one target.

Who said, β€˜Try and stop it happening again’? What and kill off a load of future opportunities to make more money. Must be mad.

As for the discussion of β€˜dog eat dog’, this kind of behaviour doesn’t exist in the canine world or much of the animal kingdom. I think it’s just humans and cockroaches.

"There are 7B people so 11 deaths really is nothing, it happens"

Yes it happens but it should not. The whole point of Health and safety laws is to ensure preventable accidents are prevented to the best of a company's ability (human beings will make mistakes and ignore any procedures so you can never stop all deaths at work). It may cost money but morally that is better than the alternative or would you prefer that companies all adopt the japanese health and safety policies whilst building the Burma railway?

31. At 12:38pm on 08 Sep 2010, writingsonthewall

Wandsworth.

@7. At 10:06am on 08 Sep 2010, writingsonthewall wrote:
"It's a false economy - but the bean counters are too stupid to work this out. It's been going on since outsourcing was invented - and it continues to wreak havoc everywhere that tries it."
You'd think this reason alone would be a counter-argument to such machinations as PFI. A case in point being the NHS IT expenditure. Additionally, surely it can't be wise to have such an arrangment in order to appear off a government's balance sheet - when a conscientious beancounter comes along to do the sums (hopefully not zero-sum) you find yourself in a far worse financial state with a much greater risk attached to it. Good job there aren't any beancounters with morals.

@29. At 12:28pm on 08 Sep 2010, writingsonthewall wrote:
26. At 12:01pm on 08 Sep 2010, Lindsay_from_Hendon wrote:
"There are 7B people so 11 deaths really is nothing, it happens. The oil lost is much worse as that will never be recovered as it requires dead dinosaurs and millions of years and we're short on both. "
-------------------------------------------------------------------
"Well I sincerely hope you're a wind up as you've marched over the lines of decency with your claim that 11 lives don't matter so long as the oil keeps flowing"
Please do not feed the trolls.

You know BP didn't mean for them to die don't you? A lot more people die every day on the roads but you don't even consider them. They knew the risks when they signed up, they received a salary in return. Two parties using free will to create a trade. Sounds like a good system to me and no one has suggested a credible alternative.

I don't care about the environment, you're right for once! After all there's nothing out there but water and fish and no one has ever explained how water and fish create wealth so they can't be of any value.

Hopefully the oil will start coming again as oil is vital for the world's economy. It oils the wheels of capitalism (along with the blood of the workers of course).

#26 Lindsey-From-Hendon;

This comment is not acceptable.You should appologise.

34. At 12:53pm on 08 Sep 2010, Kit Green wrote:

"31. At 12:38pm on 08 Sep 2010, writingsonthewall

Wandsworth."

I am under legal obligation not to confirm or deny this. Rest assured however that a 'flagship' is about to be torpedoed.

Also, you might want to watch MITIE - a company in a similar situation with Birmingham council.

Now maybe the journalists (if any are still at the ΒιΆΉΤΌΕΔ) could get their investigating hats on and do the rest...

BP will likely come out of this much smaller as it sells assets to pay for the compensation & clean-up and for any future fines imposed by the US government no to mention its legal costs which will be immense.
By virtue of this it will become a take-over target for US oil companies which will impact severely UK balance of payments and ultimately our pension funds etc.
Big oil & gas regardless of nation have terrible records when dealing with spills and the environment but I do find the stance taken by Barrack Obama towards BP only hypocritical in a year when no senior US executive after 25 years from Union Carbide has stood trial and been punished for the thousands of deaths in India. The US are still the largest consumers of energy & raw materials but Capital Hill has constantly resisted any efforts to cut consumption or aknowledge global warming so as resources become harder to find or extract the risks by definition increase as they have in the Gulf of Mexico and they will off of Greenland for example.

That said, BP is confident that it can prove that its design for the well was not flawed.

It is a bit of a distraction by focusing on the design. BP were responsible for a lot more than the design of the well. Like making sure they had a contingency plan for when/if it all went wrong.



And there is a reason why they weren't prepared. Oilmen like profits, the bigger the better and if they can externalise the costs, they will.




So you don't put oilmen in charge of EPA laws, much like you don't put bank robbers in charge of banks. That just isn't organic chemistry!

31. At 12:38pm on 08 Sep 2010, writingsonthewall

Aye. Read Blood River? The passage where he describes being in the dense jungle and discovering a strip of metal underfoot. It used to be a train track, the jungle took the land back as the country was abandoned by the markets. Only the elderly have ever seen a train, the kids don't know.

That's what happens when governments serve themselves and those who should pay taxes think they shouldn't so don't.

29. At 12:28pm on 08 Sep 2010, writingsonthewall

Thank you.

"There are 7B people so 11 deaths really is nothing, it happens"

Imagine one of them was your brother, or son, or father.
This comment shows just how much we strive for wealth above everything else.
"I'm all right Jack" attitude is taking this country to the cleaners.

How can 11 people dying because of companies cost-cutting/outsourcing/neglect, call it what you will... EVER be deemed as "nothing, it happens".

Sickening.

A bit off topic, so I apologise, but I had to share.

I've just been out to lunch, and spotted an advert in the window of a local travel agent... which stated, in bold and happy type, that they were holding a....

"Currency Clearance"

Who needs forex traders now?

This time next year they won't be able to give it away.

This comment was removed because the moderators found it broke the house rules. Explain.

I have imagined that it was a brother, a son or my father working on the rig and have to say that deeply saddens me. The idea of a member of my family doing manual labour is disgusting. I would never speak to them again.

#47

Do people still work with their hands. What proles, I shudder to think!

47. At 2:23pm on 08 Sep 2010, Lindsay_from_Hendon wrote:

"I have imagined that it was a brother, a son or my father working on the rig and have to say that deeply saddens me. The idea of a member of my family doing manual labour is disgusting. I would never speak to them again."

Fortunately trolls are solitary creatures as nobody can stand their body smell, so relatives are unlikely.

I'm sure the Beeb Moderators will switch on their anti-troll device and disable your account any day now if you continue to write such aggravating nonsense.

I think all the folk complaining about RP's use of curry's to explain his thinking are employed by the oil industry to be distractions.

Oops 50 should be next door!

@ 26. At 12:01pm on 08 Sep 2010, Lindsay_from_Hendon wrote:

> There are 7B people so 11 deaths really is nothing

Hey, these people were engineers, not bankers!

This comment was removed because the moderators found it broke the house rules. Explain.

"52. At 3:53pm on 08 Sep 2010, Jacques Cartier wrote:

@ 26. At 12:01pm on 08 Sep 2010, Lindsay_from_Hendon wrote:

> There are 7B people so 11 deaths really is nothing

Hey, these people were engineers, not bankers!"

So you think that it's acceptable if bankers die but not if engineers (stretching the term) die? How disgusting.