Oil Spills, Movie Stars, Robot Unicorns and Regulation

Michael Giberson

Even before the current oil spill into the Gulf of Mexico it was well understood that drilling offshore sometimes results in spills.  The current oil spill in the news has brought the idea of spills to the attention of many, many more people, people who don’t usually think too much about these things.  But it isn’t obvious to me that the spill should cause us to revise our estimates of the likelihood of spills, or otherwise alter any of the factors that go into well reasoned policy analysis.  And if all of the inputs going into a well-reasoned policy analysis stay the same, then the policy recommendation should stay the same too.

If you now favor changes in regulations to reduce the likelihood of future oil spills, you should identify the new policy-relevant information upon which you base your call for changes.  Or, in other words, you should specify what was wrong with your understanding of offshore oil development as of about two months ago, and then explain how correcting that mistake leads you to favor more restrictive regulations.

It is possible, too, that correcting mistakes in your earlier thinking could lead you to favor less-restrictive regulations.  After all, there is no reason to believe that all errors in earlier thinking were biased in the same direction.  For example, learning about advances in movie-star funded clean-up technologies might lead you to reduce your estimate of the expected costs of spills.

By the way, with Canadian tar sands soon to become the largest single source for U.S. oil imports, any advocates of regulatory changes that diminish oil production from offshore U.S. sources on environmental grounds should  include in their analysis the environmental effects of marginal increases in tar sands output and other oil sources.  (Or did your policy analysis assume that diminished offshore production would be compensated for by people driving less and riding sustainably-fueled robot unicorns more?)

SEE ALSO: Robin Hanson on regulation ratchets for related.

2 thoughts on “Oil Spills, Movie Stars, Robot Unicorns and Regulation

  1. Michael,

    It seems to me that the real issue here is an agency with two objectives (MMS both has incentives to maximize revenue and police safety) that has had serious agency capture problems by its regulated constituency for some time. None of that is news to people who follow drilling regulation and it was known long before the unfortunate accident aboard Deepwater Horizon.

    For those who have been rationally ignorant about the problems at MMS, perhaps the crisis is a wake-up call to think through the agencies role in all of this. It would seem that the Obama Administration has done just that. Note that this might not lead to stricter laws and/or regulations, only a different exercise of agency discretion within the policy space outlined by MMS’s statutory and regulatory mandate. And perhaps the severing of the two objectives (production and safety) into two institutions.

    From your perspective would that be a bad thing?


  2. Michael, as you outline the issue I’d say it isn’t the having two objectives, but industry capture that is the problem. Someone must make choices involving tradeoffs between benefits (which include the value of produced oil and gas) and costs (which include the possibility of environmental harms). Embedding both responsibilities in one agency involves them making the tradeoff within the range of whatever scope of action they have.

    Dividing the objectives forces the tradeoff to be made via inter-agency coordination. Maybe there is virtue in the resulting transparency. The problem with industry capture is the favoring of one set of constituents at the expense of others, and more transparent decisionmaking would constrain such choices.

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