I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.- Thomas Jefferson.

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Monday, May 10, 2010

The Oil Slick Makes Politics Very Clear

By Vedran Vuk
Imagine this scenario. Your local politician legalizes gambling in the district. At the time, he praises the economic necessity, the jobs created, and the benefits for other businesses. After a while, the politician gets bored and decides to take a trip to the casino himself. At first, things are going well. He is having drinks, rolling dice, and raking in the wins. But soon enough, he goes on a long losing streak. After a couple more drinks and a few more spins of the roulette wheel, he can’t even pay next month’s mortgage.

After being personally affected, he promises to shut down the casino despite the economic benefits for the rest of the community. It would take a complete imbecile not to realize the possible dangers and downside of legalized gambling beforehand. But until the damage becomes personal or political, the politician didn’t care. This may sound ridiculous, but it’s not much different than the position of many politicians on offshore drilling today.

When the damage hits home, politicians are willing to overturn any law. Just look at the Gulf of Mexico oil spill. As soon as the spill occurred, Obama and other politicians came out of the woodwork either slamming offshore drilling or demanding more safety precautions. Obama immediately ordered a moratorium on the recently expanded offshore drilling until rig safety is reviewed. Now that the political repercussions are being felt, drilling supporters are singing a new tune. They’re willing to overturn national energy policy just to save themselves from bad PR.

But has anything changed from before the spill?

Drilling comes with risks. These accidents have happened in the past and will surely happen again. It would be ridiculous to assume that Obama didn’t understand the risks of drilling prior to the spill. A liberal administration should have been particularly informed. The oil spill isn’t exactly an extraordinary event. Yet, it is being treated like an unpredictable occurrence that forces Washington to reconsider offshore drilling. What a bunch of baloney.

So, how do we know whether offshore oil drilling is worth it or not? First, hold BP accountable for all spill damages down to the last cent. If BP continues to drill after paying the damages, then the project benefits society. Oil companies, like any firm, provide goods and services demanded by the market. If despite the higher damage costs BP can still drill at a profit, this shows that society benefits from the enterprise.

Profit-and-loss analysis answers a very basic question: Is the benefit of an activity worth the expense? If the cost is greater than the value placed on the product by society, then the product will not be produced. If society values the product more than the cost necessary to acquire it, then the product will be produced. Hence, with accountability, the question of “to drill or not to drill” answers itself. No company purposefully runs a negative operating margin.

Even the average Joe understood the risks of an oil spill; no one should be surprised here. If the dice are rolled enough times, eventually you will lose. It is a matter of statistical certainty. The oil may make the water murky, but it makes the political process very clear. Politicians are not here to help society. If a policy affects them personally or politically, they’re willing to harm the entire nation’s energy policy to save their reputations. Everyone must suffer for them. These are mentally ill, sociopathic individuals who will hurt anyone and everyone to get their way.

Despite knowing the risks, Obama and others didn’t give a damn about the fishermen and the wetlands just a few weeks ago. Now, they’re hand-in-hand with the locals. These politicians want to end drilling not because they care about Americans – but because they care about their political futures.

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