08/06/10 Baltimore, Maryland – Indeed, even with the government’s report declaring the cleanup 75% complete, the Gulf of Mexico recovery will be slow and laborious. And expensive…
As of a few hours ago, there’s enough fresh cement in the Macondo oil well to hold down the “mud” that’s keeping the oil beneath the seafloor. It’s not the final step in plugging the hole, but it’s a big one. Now the tallying begins.
BP reckons its repair and cleanup costs will total $32.2 billion – of which $2.9 billion has already been spent.
But let’s say, for argument’s sake, the costs end up being double what BP estimates. Call it $64 billion. That’s certainly a lot of money. And who knows what the long-term effects of the spill will be on the economy in the Gulf region.
Then there’s the industry itself. The feds are now suggesting they may end their ban on deep-water drilling before the original Nov. 30 deadline. But that may not be soon enough.
Work on 33 exploratory wells was stopped as a result of the government’s reaction to the Deepwater Horizon disaster. “We probably won’t be anywhere near 33 rigs” when that work resumes, our oilman Byron King reports. “It’s not like they’re waiting at the pier” for the go-ahead.
Instead, some of the most advanced offshore drilling gear in the world was idled by the ban. It’s now going overseas, where the recovery will be much quicker – if it ever even missed a beat. That’s good news for oil companies in places like Norway and Brazil. But not so much for those operating in the Gulf.
Already considered history’s worst oil spill, could the BP blowout have been any worse? Let’s try to gain a little perspective.
Fannie Mae just registered another quarterly loss – three straight years of losses, if you’re keeping score at home. Thus, Fannie is headed back to the well at the Treasury for another $1.5 billion in aid. Make that $86.1 billion in total aid that Fannie has vacuumed up from the US taxpayer to date.
There is little evidence the money that the Treasury is pumping into Fannie is accomplishing anything. It won’t repair or rebuild a single home. It won’t help a strapped homeowner avoid foreclosure. It won’t help a solvent homeowner build equity.
The Fannie bailout is like a neutron bomb – destroying paper wealth, but leaving physical structures intact. You want some bigger black hole numbers?
- AIG has sucked up $118 billion so far – with another $64 billion to go
- General Motors got a $49 billion bailout.
All told, the Fed and the US government have lent, spent or guaranteed $8.2 trillion in taxpayer money to keep the financial system on life-support. They could have cleaned up ‘the worst oil spill in history’ over 254 times with the money that’s been spent on bailouts, backstops and boondoggles. BP, a publicly traded company, is, as they should, promising to take responsibility and foot the whole bill.
We don’t want to minimize the disaster…but from a sheer dollars standpoint, it pales in comparison.
With the blowout in the Gulf, the US government learned that the field beneath the Macondo geyser contains some of the most-productive known reserves in the world. Give the American public a few years to forget – and for the government to rearrange the rights – and you’ll see “some of the highest bids for oil leases at auction to ever grace the planet,” says Byron.
Addison Wiggin
for The Daily Reckoning
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
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