There is no oil spill in the Gulf.
BP has just decided to enter the market for sunscreen on a huge scale.
Category: Energy
Top Kill Fail
So the blow out, and the resultant oil spill, continues unabated.
But BP needs to be in charge, because they know what to do to fix this.
Why Senior Management at BP’s Should Be In a Deep Dark Hole
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The Crime Scene
Hours before the Deepwater Horizon exploded, representatives of Slumberger*, who had been called in to perform a “Cement Bond Log (CBL) ” test.
Slumberger, much like Halliburton, is primarily an oil services firm, though it’s rep is as the Cadillac of the service companies, and is, unlike Halliburton, considered to be highly ethical.
Well, they were getting ready to run the test, about 6 hours before the blowout and explosion, and they look at the numbers, and say shut down the operation now, and when the BP management says, “no”, they ask to be flown off, and BP refuses, so they call in a Slumberger helicopter to get the hell out of dodge:
BP contracted Schlumberger (SLB) to run the Cement Bond Log (CBL) test that was the final test on the plug that was skipped. The people testifying have been very coy about mentioning this, and you’ll see why.
SLB is an extremely highly regarded (and incredibly expensive) service company. They place a high standard on safety and train their workers to shut down unsafe operations.
SLB gets out to the Deepwater Horizon to run the CBL, and they find the well still kicking heavily,† which it should not be that late in the operation. SLB orders the “company man” (BP’s man on the scene that runs the operation) to dump kill fluid down the well and shut-in the well. The company man refuses. SLB in the very next sentence asks for a helo to take all SLB personel back to shore. The company man says there are no more helo’s scheduled for the rest of the week (translation: you’re here to do a job, now do it). SLB gets on the horn to shore, calls SLB’s corporate HQ, and gets a helo flown out there at SLB’s expense and takes all SLB personel to shore.
6 hours later, the platform explodes.
Note that we do have confirmation that this cement bond log test was never conducted:
BP hired a top oilfield service company to test the strength of cement linings on the Deepwater Horizon’s well, but sent the firm’s workers home 11 hours before the rig exploded April 20 without performing a final check that a top cementing company executive called “the only test that can really determine the actual effectiveness” of the well’s seal.
A spokesman for the testing firm, Schlumberger, said BP had a Schlumberger team and equipment for sending acoustic testing lines down the well “on standby” from April 18 to April 20. But BP never asked the Schlumberger crew to perform the acoustic test and sent its members back to Louisiana on a regularly scheduled helicopter flight at 11 a.m., Schlumberger spokesman Stephen T. Harris said.
…………
Schlumberger’s Harris said the contractor was ready to do any such wireline tests, but was never directed to do so. The team had finished doing tests on the subsea layers of earth being drilled five days earlier and hadn’t done any work since, Harris said.
In fact, Harris said there was no time to get the company’s wireline testing equipment off the rig before it exploded.
So BP’s side of the story is that they hired the most expensive, top of the line, oil field services company out there to run a test, and never bothered to let them complete what they had paid for, and the time line is a bit different.
But what is clear is that Slumberger left, and they left their very expensive equipment in their haste to get off the platform, because they saw a disaster coming, and they could not stop it.
H/t Thom Hartmann.
*Full disclosure, one of my step-mother’s oldest and dearest friends was a Slumberger, yes, one of those Slumbergers.
†Basically, as they drill a well, they add fluid (mud) to balance the pressure so that it does not erupt out of the well head. When a well is “kicking”, it means that the pressure is not properly balanced and the oil/gas/water is blowing out the mud. See the Wiki.
Economics Update
Well, over the past few days, we’ve had a spate of good news, with the New York Bank of the Federal Reserve’s Empire State index showing continued growth, though that growth is slowing, with the index dropping from 31.9 in April to 19.1 in May.
Additionally, credit card issuers are reporting reduced delinquencies for April.
In real estate, we have the National Association of Home Builders confidence index rising to a 2½ year high in May, as well as an increase in housing starts, though housing permits have fallen, which indicates that the builders are expecting the euphoria to be short lived.
Finally, concerns about the Euro zone, and a related return to recession (we’re out of recession?) have pushed both oil and the Euro down.
This and $8.95 Will Get You a Starbucks
BP is claiming success at its latest attempt to ameliorate the oil spill:
After two false starts, engineers successfully inserted a narrow tube into the damaged pipe from which most of the oil is leaking.
“It’s working as planned,” Kent Wells, a senior executive vice president of BP, said at a briefing in Houston on Sunday afternoon. “So we do have oil and gas coming to the ship now, we do have a flare burning off the gas, and we have the oil that’s coming to the ship going to our surge tank.”
I’ll wait for independent verification, thank you very much, and BP is not in the least interested in independent verification:
BP has resisted entreaties from scientists that they be allowed to use sophisticated instruments at the ocean floor that would give a far more accurate picture of how much oil is really gushing from the well.
So I doubt that a meaningful amount of oil is coming up to the boat.
“The answer is no to that,” a BP spokesman, Tom Mueller, said on Saturday. “We’re not going to take any extra efforts now to calculate flow there at this point. It’s not relevant to the response effort, and it might even detract from the response effort.”
Oil Spill Update
Here’s a shocker, the US Government is likely understating the amount of oil flowing out of that busted well in the Caribbean by at least a factor of 10.
Also, they are starting to recover oiled birds on the Gulf coast.
Not Enough Bullets
Transocean, the firm operating BP’s oil rig that exploded and created a blowout that is threatening most of the US Gulf coast, will make $270m from the loss of the rig because it was insured for more than it was worth.
I thought that this has been illegal since the Marine Insurance Act of 1746.
Economics Update
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Unemployment Population Ratio: Still Not Back
The lede here has to be the non-farm payroll (NFP) numbers for April, which were very, very, good.
There was in increase in payrolls of 290,000 , which was the largest increase since March of 2006, and manufacturing added 44,000 jobs, the largest increase in 12 years.
Additionally, as Paul Krugman observes, “My favorite indicator from the household survey isn’t the unemployment rate, it’s the employment-population ratio — and that’s up, from 58.6 to 58.8.”
It’s been rising since December.
Unfortunately, unemployment worsened, though part of this was discouraged workers returning to work:
But. Keep an eye on those unemployment rates. The headline figure is back up at 9.9%, the highest it’s been this year. The U-6 underemployment rate is a gruesome 17.1%. And U-4, which is total unemployed plus discouraged workers, has hit a new high of 10.6%.”
Even at nearly 300,000 new jobs a month, it will take years for these people to find work again.
Additionally, we have the short-term good/long-term bad news that consumers are using credit once again. Consumer borrowing rose by $2 billion in March.
In energy and currency, it appears that Greece, and the recent UK elections have created uncertainty, which has driven oil prices lower, and the dollar was mixed, up slightly versus the Pound, and down slightly versus the Euro.
Jon Stewart Makes a Very Good Point
See profiling comment at 4:20
As always.
Actually, he makes a number of them, with the big one being, “What are we going to do in this country when we get attacked by someone who’s not one of the Home Alone burgers?”
But there is the little point that he makes that I find far more trenchant.
He runs an ad put out by a Teabagger candidate running against Alan Grayson, Dan Fanelli, talking about profiling terrorists, and brings out two men, one swarthy and bearded, and one white and old, which asks “Where’s Waldo” which one is the terrorist?
This leads the doyenne of late night news to ask the question himself, “Which one? Doctor Kevorkian on the left, or the cast member from The Jersey Shore on the right?”
Stewart’s answer is that the terrorist who flew his plane into the IRS building in Texas looked an awful lot like Congressman wannabe Fanelli.
Economics Update
Well, generally good news today, with bankruptcy filings dropping 4% between April and March.
Additionally, there was a spike in pending home sales, though that was likely the now expired home buyer tax credits, and factory rose unexpectedly in March.
In energy and currency, it’s all playing off of Greece, which is pushing the dollar up, which in turn pushes oil down.
You Keep Using That Word. I Do Not Think It Means What You Think It Means.
It appears that BP neglected to take precautions on the oil platform, because, “BP did not build containment devices before disaster because it ‘seemed inconceivable‘ the blowout preventer would fail.”
Tell me that this is not an Inigo Montoya moment.
Economics Update
Slow day, but the first bit of news is a big one, in that the GDP grew at a 3.2% annual rate in the 1st quarter, though this is somewhat tempered by the fact that half of this was an increase in inventory, not increased consumption.
Also, Greece is still figuring in commodities and currencies, with the expectation of that the details of the bailout will be showing up shortly, driving oil up and the dollar down.
Wanker of the Day:
Reliably spouting right wing talking points since 2004
Barack Obama.
For claiming that there were no oil spills from platforms and as a result of Hurricane Katrina:
I don’t agree with the notion that we shouldn’t do anything. It turns out, by the way, that oil rigs today generally don’t cause spills. They are technologically very advanced. Even during Katrina, the spills didn’t come from the oil rigs, they came from the refineries onshore.
The problem here, as the folks at Media Matters so ably note, this is false. Hundreds of thousands of gallons of oil and distillates were spilled offshore as a consequence of hurricane Katrina.
It’s not true, it’s never been true, and he’s a smart guy, and he knows this.
Well, Here’s a Shocker
It looks like the explosion and subsequent oil spill that is threatening Louisiana and other Gulf coast coastal regions may have been caused by a failure to properly seal the pipes with cement, a procedure that was performed by Halliburton:
The scrutiny on cementing will focus attention on Halliburton Co., the oilfield-services firm that was handling the cementing process on the rig, which burned and sank last week. The disaster, which killed 11, has left a gusher of oil streaming into the Gulf from a mile under the surface.
Halliburton is the Vampire Squid of the oil services industry.
Economics Update
Well, the Federal Reserves Open Market Committee (FOMC) has spoken, and it has kept its benchmark rate at effectively 0, and repeated its statement that the rates will remain low for an extended period.
Not an unexpected development. After all, the economy still sucks.
In real estate, mortgage applications fell overall, but home purchase applications rose. This is probably the interplay of rising rates versus the expiration of the home purchase tax credit.
In the real world, the American Trucking Aassociation’s Trucking Tonnage Index rose in March, indicating that there is something positive going on.
In the world of sovereign debt, the US Treasury 5-year bonds’ yeild rose to 2.54%, though compared to the yield on 2-year Greek bonds, which are now over 20% (!), it’s pretty cheap money.
Also note that in the continuing euro zone meltdown, Spain’s debt rating was cut S&P.
In energy and currency, oil rose on the news that the FOMC’s posture is unchanged, and the dollar rose on continued Euro zone problems.
Economics Update
Well, we have absolutely boffo numbers on the new home sales front, with sales climbing 27% from February to March, though as Barry Ritholtz notes, “In February 2010, new Home Sales reached a record low. Bouncing off of those depressed levels is not a big deal.”
I call a dead cat bounce, with a 3 cushion shot because of the February snowpocalypse, though it is still good news, as is the durable goods order number, which were down overall, but up when aircraft sales are factored out.
As to currency and energy, the reduced fears over Greece following their request for external aid pushed the dollar down, and the housing numbers drove oil higher.
Economics Update
Beyond L’affaire Goldman, it’s a slow news day
We have the Reuters/University of Michigan consumer confidence survey falling, and applications for building permits up sharply in March.
The oil and currency numbers are really about the Goldman Sachs enforcement action by the SEC, which raised concerns about the economy, and this uncertainty has pushed oil down, and the dollar up, on a concern about demand and demands for safe havens respectively.
Quote of the Day
This man should spend the rest of his life digging coal a mile below the earth with his bare hands
Crusiing the innerwebz, a member of the by invitation only Stellar Parthenon BBS discovered the following video of Massey CEO Don Blankenship’s.
It’s short, but you will note that he thinks that agencies attempting to make coal mines safer are as “silly as global warming.”
Well, one of the users, Jolly Reaper, on said the following:
If he doesn’t get whacked by a miner, this nation really is full of pussies.
It’s true.
One of the great tragedies of US culture is that when disgruntled employees go on shooting sprees, they target their coworkers, as opposed to upper management, which should then be followed by a few acquittals.
While any loss of life is tragic, if there was a real fear of death among upper management as to their safety, we would see better management.
It seems that even workers going postal give too much deference to the MBA/Banker types.
Economics Update
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Well, it’s kind of a slow news day, as the big news was the Euro loans to Greece, but we do have another sign of a recovery, which is that business orders are on an upswing worldwide.
All in all, I think that we are truly in recovery, unless another shoe drops in high end finance, but I’m kind of expecting another shoe to drop there, causing another panic and another bailout.
The National Bureau of Economic Research (NBER) continues to take a conservative approach, saying that, “The determination of the trough date on the basis of current data would be premature.”
This is not surprising. The folks at the NBER typically take more than a year after the trough bottom to announce that they have determined a trough date.
In energy, gasoline is up nearly 4¢/gallon this over the last three weeks, to $2.85/gallon, and it’s not unreasonable to assume that it will break $3/gallon by the start of the summer driving season.
As to oil, it fell today, as and so did the dollar, largely in reaction to the Greek bailout.
Obama Says, “Drill, Baby, Drill”
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The Audacity of D’oh!
Once again, Barack Obama decides to cock-punch the base, and he announces a massive expansion of offshore drilling that largely echos those of George W. Bush, with the protection of Bristol Bay being the only major change.
He did this with nuclear power a 1½ months ago, so I guess that this is not a surprise, particularly given his lip service to the fraud that is “clean coal.”
It appears that part of his goal is to get some Republican support for his climate change bill, but, as was shown in healthcare reform, the Republicans are not good faith actors.
Better to use the recent EPA declaration about C02 emissions as a harmful emissions as a club, and keep this in your back pocket, because giving away the store upfront results in really bad policy.