http://www.nytimes.com/2011/01/10/business/energy-environment/10oil.html?ref=business
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"Bureaucracy is the death of any achievement." (Albert Einstein)
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A small oil leak at a pumping station has shut down the Trans Alaska Pipeline System. The leaky pipe connects a "huge" storage tank to a pump that pushes oil down the pipeline (which is 800 miles long and carries 10% of the oil used domestically).
While the leak was not large (10 barrels of oil), officials could not say how long it would take before the piping was secure enough to increase pressure down the pipeline: "The significance is having to shut the pipeline system down," said a spokesperson. Adding that, "We want to make sure we can restart the line safely and without damage."
And, what company owns the largest share of the consortium that runs the pipeline?
Answer: BP
Amy Myers Jaffe at Rice University: "The market is already in a mood for oil to go to $100 per barrel so any disruption of a major size - like stopping Alaskan oil from coming to market - is going to give instantaneous momentum to prices."
Wait, wasn't it March, 2006 when "corrosion" in BP's network of north Alaska feeder lines caused a spill of 260,000 gallons of oil, the worst in the history of the North Slope? BP eventually paid more than $20 million in fines and restitution for that event.
Just an added thought: "corrosion" is preventable. A good system of management process safety and priority capital deployment pays for itself.
Ms. Jaffe sees $3.50 per gallon as the average gasoline price at the pump by this coming summer. Traders are looking for any excuse to jump gasoline futures higher. Odds are the price per gallon at the pump will jump today.
A rhetorical question: how long did the spokesperson say the Alaska pipeline would be shut down?
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A bit off the main topic...for corrosion to be preventable in the eyes of BP, the cost of preventing the corrosion need be less than what BP pays in fines over a specified period of time. It seems to ensure this, fines for oil spills need to be increased.
ReplyDeleteAm I being cynical? Is BP mismanaged or do they know exactly what they are doing?
Back on the main point...are you suggesting that the shutdown of the pipeline is a calculated move by the pipeline oil consortium (BP) to increase the price of oil?
Great questions! What I'm suggesting is that BP has been deaf to safety as a management process priority (see my 5/1/09 post and attachments). They pay it lip service and pay the fines. Then, people die or get hurt. There is a direct correlation between employee safety, employee productivity and profit margins.
ReplyDeleteAnd, you are not being "cynical." BP has been mismanaged.
And, I am not suggesting that the shutdown of the pipeline is a calculated move to increase oil prices. Those people know that the long term growth in oil prices will happen based on other factors - this is just a short term "blip" to them.
How can this problem be solved? Other than an ethical overhaul at BP, the only solution I see is increased governmental regulation of the oil and gas industry. Namely, an increase in the severity of fines and penalties. But then again, even the government can be bought. This is an interesting conundrum for sure.
ReplyDeleteAddendum...
ReplyDeletehttp://www.cnbc.com/id/41044074/
Dhanks: You must ask yourself if the same thing would have happened in the Gulf if Exxon owned the platform that blew up on 5/1/10. The answer is no. It's not the industry - it's the company.
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