We have no gripe with the way this administration is handling the situation in the Gulf. Hold your laughter — we are serious.
Similar to the situation with the Bush administration’s reaction to Katrina, some of the criticism leveled at the Obama White House is certainly warranted; but a lot of it, most of it, is politically motivated.
This White House has a number of intelligent people working to try and find a solution. We do not doubt their sincerity. We also do not doubt the sincerity of BP to find a solution as expeditiously as possible, regardless of agenda-driven epithets to the contrary.
However, we are concerned with the degree of rhetoric (i.e., "keeping our boot on BP’s throat"; "whose a** I should kick?") emanating from the White House. How is this helpful?
Now we are reading stories that Obama and lawmakers in Congress are considering, for lack of a better term, confiscating BP’s U.S. assets vis-à-vis invoking EPA sanctions that could potentially rescind BP’s control of its current oil and gas wells, forcing the company to sell these units. The proposed legislation would also ban the company from future leases and transacting business with the U.S. government.
We are not belittling the spill in the Gulf. It is a catastrophe and BP will be held to account. Yet, as far as these proposed sanctions go, nothing good, unless you are bullish oil, will come from it. Nevertheless, BP is down and it is easy to score political points off of them.
BP’s culpability aside, the company is also responsible for helping to bring an additional 368 Mbbl/d (+7.4%) of domestic oil to the market last year, i.e., 134 MMbbls — or more than three months’ worth of Venezuelan imports.
That output is now under threat. Thus, there is growing concern that the U.S. offshore oil industry will go the way of the nuclear industry post Three Mile Island. In this vein, we hope cooler heads in Washington will prevail.
In the meantime, here is The Schork Report's constructive posturing: if our lawmakers want to appear tough for the television cameras, then how about they go after a real target with real sanctions?
After all, it is not like BP is building a nuke and threatening, metronomically, one of its neighbors with annihilation. Too bad for BP, because if that were the case then the worst the company would be facing is a letter from the U.N. expressing its deep concern.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.