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Gulf oil slick 'worst in US history'

Early reports are indicating that BP's risky bid to plug it’s Gulf of Mexico well appear to be working – but the subsequent oil slick may be far greater than anyone dared fear.

US officials have reportedly confirmed that the well appears to be no longer leaking – but at the same time it’s being reported that the oil slick is now the worst in the nation’s history (see satelite photo, left), and that BP appears to have attempted to downplay the scale of the disaster.

President Barack Obama, at a press conferrence this morning (Thursday, May 27) said his government will hold BP fully accountable for the massive oil leak in the Gulf of Mexico, and barred any new deepwater oil exploration for six months.

A report in today’s Vancouver Sun newspaper, BP stops oil flow; slick worst in U.S. history, states the US government now believes oil may have been gushing into the Gulf at a much greater rate than BP had stated:

New data released by government scientists said the oil may have been flowing at a rate up to four times higher than previously estimated by BP.

The new estimates suggested the oil was gushing out at a rate of between 12,000 to 19,000 barrels a day — much higher than the previous estimate of 5,000 barrels a day.

Under such a scenario, that would mean between 18.6 million gallons and 29.5 million gallons of oil have seeped into the Gulf — way higher than the 11 million gallons of crude spilled in the 1989 Exxon Valdez disaster off Alaska.

With 100 miles (160 kilometers) of Louisiana coastline already contaminated, there are fears U.S. officials may order the burning of the state's unique marshlands, home to a variety of endangered birds and mammals.

Based on the 5,000-barrels-a-day figure, the clean-up cost was estimated at $23 billion – although subsequent press speculation is that “the company could now face effectively unlimited fines” under the US Clean Water Act. According to the UK Daily Telegraph “ the US government could seek to fine BP up to $4,300 for every barrel leaked.”

And it’s hard to imagine the government cutting BP much slack, considering reports emerging that the oil giant had been allegedly cutting corners immediately before the April 20 explosion and sinking of the Deep Horizon rig and resulting spillage from the Macondo well.

According to a report in yesterday’s New York Times, documents supplied by a congressional investigator suggest BP had been using the riskier – and cheaper – of two methods to seal the well shortly before the blast:

The approach taken by the company was described as the “best economic case” in the BP document. However, it also carried risks beyond the potential gas leaks, including the possibility that more work would be needed or that there would be delays, the document said.

The industry has been speculating on how this will play out across the board. While no-one expects a permanent ban on deepwater drilling off the US coast, an item on Wall Street Journal blog The Source, headlined Oil Industry Suffers First Blowback From BP Spill, suggests Royal Dutch Shell has suddenly found itself unable to go ahead with plans to immediately drill an offshore Alaskan well, and that the industry as a whole will face rising costs:

“A clear outcome of the Macondo well blow out will be higher offshore drilling costs in the future,” said Evolution Securities in a research note. “Changes are likely to include tougher permitting systems; tougher inspection regimes for safety equipment; higher specification for key safety components and more redundancy features; more extensive clean up plans.”

Insurance premiums for deepwater drilling have already jumped 40% and may rise further if U.S. lawmakers raise the liability cap for oil spills from $75 million to $10 billion, Evolution said.

Rising costs for the industry, at a time of oil price volatility – oil dropped to $70-per-barel due to the European debt crisis, and currently stands at $73 – spell trouble. All it would take is a pronounced market downturn to make deepwater ventures untenable, and the world’s markets are in deep trouble. Europe is awash in debt, China’s economic miracle, based on a housing bubble, is beginning to look shaky, and the US is printing money to bail its own economy out.

Things may be coming into place for a more upfront discussion about the reality of peak oil. The oil industry has nothing to lose by talking about just why it is forced to look to extract oil from mile deep seabed. It's probably time for oil companies, and governments, to admit that this is where the last oil reserves, outside of Opec, are to be found. And at the same time, for those of us that object to deepwater drilling and oil sands extraction to face up to the fact that - like it or not - our modern world runs of such environmentally destructive energy. That's not to let BP off the hook for apparently cutting corners, but to admit the realities of peak oil.

As the Whiskey and Gunpowder site provocatively puts it:

I guess my concern is all those who will come out of the woodwork and decry what’s happened here…and then drive twenty miles to a supermarket and shop for goods brought in from across the country by a fleet of trucks. They just don’t appreciate how necessary offshore drilling is for their way of life to continue. It’s one thing to say BP or Transocean fouled things up royally, but it’s another to say that they shouldn’t be drilling in deep water at all.

Editorial Notes: This article updates Matthew's earlier post today "that cites the earlier, and much lesser, flow figure of the Gulf oil leak." See the New York Times article here that talks about the top kill process being temporarily suspended. -KS

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