Tuesday, June 22, 2010

Oh No, Another Blowout In The Gulf!

Well obviously this hasn't happened yet, but the worst nightmare is that the so called relief wells will themselves cause a blowout. If you think that this isn't possible, then you need to more closely follow the record.

The two related NY Times articles below paint a very scary picture. The first story is 23 pages long so I will synopsize it for you:

1. Deep water oil drilling is a very dicey and not well-understood proposition...nothing earth shattering about this conclusion.

2. The ultimate fail-safe mechanism is the five-story tall blowout preventer which according to all reports is a Rube Goldberg device that relies on, in effect, giant scissors to sever and seal the mile-deep pipes when necessary.

3. Preventers are notoriously fickle. They have a single point of failure (certain valves) and in deep water usage, they fail 45% of the time. So much for Tony Hayward's stupid statistics about this being a 100,000 to 1 or 1,000,000 to 1 accident, as I have previously written about.

4. Everyone in the oil industry (yes that means you Exxon, Shell et al) employs this technology and they fully comprehended the risks and shortcomings associated with their blowout preventers.

5. The government including Obama and his retinue also knew about all this. Responsible agencies repeatedly failed not only to order redesigning the apparatus but also to demand that existing preventers be adequately tested.

6. The oil industry and the present government continually conspired to prepetuate the dangerous status quo with respect to deep water drilling.

The second NY Times piece outlines notes taken by on-site engineers which demonstrate how little even the "experts" know about how to contain this monster.

So what can we speculate about the ongoing situation? It's absolutely clear that there are no containment solutions on the horizon, other than attempting to drill relief wells, and even the abatement efforts are proving to be feckless so far. But the unspeakable truth is that nobody in authority is talking about what might happen if one or the other relief wells also blows out. And what is preventing that from occurring? You guessed it...a blowout preventer, albeit with some extra redundancy (2 scissors) but fundamentally, the same design as the original one that crapped out.

I wish I had answers or even suggestions that would apply to the present mess. But I do have well-founded fears that things could get very much worse, and I don't think that the oil industry should be running around doing more deep water drilling until they are prepared to demonstrate and deploy safety measures that are substantially more reliable than what exists today. I realize that considerable economic loss follows such a policy but as we have already seen, there are even worse consequences to continuing on the perilous path that led us to where we are today.

Here are the article links:



Saturday, June 12, 2010

The Afghanistan Fiasco (Continued)

In blogs posted on November 24, 2009 and December 9, 2009 I criticized severely the war effort in Afghanistan. Basically I asserted that this altercation is unwinnable, unpopular and unfair to those poor kids who risk their lives pursuing America's futile quest in the Middle East.

As just reported in the NY Times, Karzai the sleezebag is said to be cozying up to the Taliban because he believes that neither the West nor NATO forces can ultimately prevail. While it would have been nice if Karzai had made this proclamation more than a year ago, I find it hard to blame him for voicing, what seemed to me all along, an obvious truth. For all the gory details, you can follow the link below:


In a related editorial, Bob Herbert opines in his usual eloquent style. In "The Courage to Leave" Herbert exhorts our government to admit that we have deeply misjudged the situation in Afghanistan and in effect, to get the hell out of there now. I couldn't agree more. Here's the link:


American Nero...Good Graphic, Different Subject

I recently used the graphic above which depicts Obama as Nero, fiddling while Rome burns. Just yesterday, a WSJ opinion piece likened the Prez to "An American Nero." You can access the link below. The article's gist is that the President, PICUS or whatever insists on throwing parties and taking vacations while:

1. The Gulf oil spill gets worse, Obama's ridiculous "ass-kicking" statements notwithstanding.
2. The economy is in shambles.
3. The "war" in Afghanistan deteriorates into dust (see my next blog.)
4. The US debt/deficit situation has escalated to "condition red."
5. The health care legislation is starting to look like the disaster that many predicted it would be; PICUS is now running around defending it like crazy to anyone who will listen to him...seniors, doctors, congress, whomever.

You can read all this for yourself but I was amused that the analogy they used is the same one that, a few days ago, I also conjured up.


Wednesday, June 9, 2010

Bad Math Reaches Beyond Financial Debacles

In prior blog posts, specifically on September 8, 2009, September 11, 2009 and in sporadic comments throughout, I highlighted the atrocious risk management based on poor mathematical modeling that precipitated the financial meltdown in 2008. Going back ten years earlier, Long Term Capital Management made similar miscalculations despite the fact that two Nobel Prize winners in economics, Myron Scholes and Robert Merton worked there.

Now it seems that British Petroleum in particular and perhaps the oil industry in general are also using ludicrous algorithms for predicting risk. For example, Tony Hayward, the beleaguered CEO has made pronouncements ranging from stupid/insensitive all the way to downright pernicious.

"I would like to get my life back" is a really dumb and selfish thing to have said...hey Tony I've got news for you, 300+ million people in America would like their lives back too. "We are 60-70% confident that the top kill procedure will be effective." In hindsight, it doesn't seem like that prediction was all too accurate...top kill efforts failed repeatedly such that there is no possible way that they ever had anywhere near a 60% chance to succeed. Before cutting the leaking pipe, BP told us that this action might increase the outpouring oil volume by 20%. Now, some scientists are worried that after the cut has been made, the exiting oil could be many times that 20% estimate.

What really frightens me though is something that Hayward let slip this past Sunday and I am a little dismayed that I have not seen anyone in the media call him on it. In a press release Hayward was quoted as noting that the probability against this accident happening was "100,000 to 1 or even 1,000,000 to 1." At face value, this is an utterly absurd statement. It would be like handicapping a horse as being somewhere between a 10-1 and a 100-1 shot!? Probabilities which range a full order of magnitude are inane and useless.

Moving to the next level, even if the odds against the spill happening were indeed one million to one, the risk-adjusted view, which ostensibly should be used for making operational decisions, is far greater (perhaps a thousand times more likely) than that. One million to one is a better chance than someone has to actually win the lottery and yet, lotteries are won every week...get the point?

Finally, how in the hell did anyone manage to come up with this probability appraisal? There have been in aggregate, fewer than 6,000 deep water wells drilled on the planet. Throughout deep water drilling history there have certainly been numerous accidents; the Gulf spill is cataclysmic, but there have been other serious mishaps. One would think that prudent risk management would use prior drilling history to rate the potential danger before knocking open a hole in the bottom of an ocean.

For once I agree with President Obama...Tony Hayward should be terminated as BP's CEO but I have reasons different than Obama's. The President thinks that BP caused the oil spill but I rather believe that the oil industry in cahoots with the government was responsible for it. Shell, Exxon et al are I'm sure on their knees with their Rosary beads thanking the Lord that something like this didn't happen to them...this time (remember the Valdez?) Rather, I think Hayward should be canned because he makes stupid, inaccurate and dangerous public statements. He also allowed his company to behave in a grossly negligent manner, without properly considering the dire consequences that ultimately arose from this carelessness.

It may sound like I abhor oil companies, deep water drilling or even Wall Street, but that assessment is entirely incorrect. I am not even arguing for risk aversion...all progress requires taking a chance on something. But I am advocating rigorous risk awareness/abatement and the mathematical tools to perform this analysis already exist, albeit, outside the realm of the conventional statistics that are most often used. For example, if Exxon, the industry and the government had properly come to grips with the fact that tankers can run into something that punctures them, then maybe double-hulled vessels would have been more prominent at the time the Valdez incident occurred...this wouldn't have averted the spill but it would have mitigated the damage. If BP had realized that its drilling strategy and cost-cutting mentality (see the NY Times link below) were not only bet-the-company but also, bet-the-Gulf of Mexico propositions, then perhaps it would have bored relief wells (assuming that this is the ultimate solution...we'll see if that's true) simultaneously when poking the production hole. I'm not suggesting that I know the specific risk-reduction remedies, but I AM saying that anyone who is in a position to create catastrophes had better completely recognize their predicament. While there are always possibilities for error, in situations like this, trivial considerations such as short-term profits, cost-savings and the like must be dwarfed by overarching, preplanned, redundant remedial resources which are deployed long before any accident can possibly happen...in other words, before drilling begins.

Modifying corporate and governmental behavior patterns with respect to potentially gigantic human, environmental and financial liabilities like the Gulf spill will require not only new, more appropriate risk measurement methodologies but also, a refreshed risk-reward mindset. If projects can't sustain the costs associated with extensive, appropriate prophylactic elements then they should be abandoned. I have no idea how much oil is in that particular reservoir in the Gulf, but whatever it is, it isn't worth the trouble and tragedy that this spill has caused.

For a more detailed description about BP and their missteps, please see the NY Times article below:


To read about oil projected to climb up the east coast and beyond, you can check out this piece from the WSJ:


Friday, June 4, 2010

The Prevaricator In Chief (PICUS) Part II--A PERFECT Example

The Dow lost 323 points (3.15%) today. Why? There are troubles in Europe for sure and the Euro is at an all-time low. China is making the usual strange noises that get everyone nervous. But the main culprit is the absolutely terrible employment report released today.

Economists had expected a 515,000 job increase and the numbers came in at a disappointing 431,000 but that's not the whole story. The private sector eked out a few new positions but the census bureau added 411,000 temporary workers which obviously accounts for nearly the entire 431,000 increase. At this rate, it will take more than 5 years to get back to normal unemployment levels around 5%, but we won't have another census for 10 years so we can't count on help from that quarter again soon.

So the employment data and its ramifications are bad enough already but what has me hopping mad is the PICUS's unfortunately predictable behavior. Earlier this week, Obama and his head henchman Biden were running around presaging Friday's report by saying things like "boy are these numbers going to look good." As late as today, the PICUS crowed about "job growth five months in a row" or some such drivel.

Does the PICUS believe that everyone else is an idiot? Wall Street saw through this charade and rewarded us with a precipitous market decline. Europe is laughing at us. China must be thinking that Americans are really bad at math. Sadly, our population isn't simply debunking all this lunacy, they are living the reality.

Thursday, June 3, 2010

A Timely Update On Health-Care Benefits And Costs

Since I just posted a blog that (in part) questions the costs associated with the health-care legislation, I find it particularly interesting that two very recent articles seem to confirm that congress used very suspect figures and reports to justify their actions. Full disclosure compels me to openly admit that in all likelihood, I will personally benefit from the new health-care laws, as will I believe, millions of Americans. But that doesn't justify the chicanery and obfuscation that we've gotten on this topic from our friends in Washington and that is the point that I drive at in my prior posting.

The first article is an op-ed piece by Karl Rove who clearly is as partisan as one can be. Nevertheless, he almost always stitches together his facts better than Obama ever has, and according to Rove, the actuarial assumptions used by the health-care stalwarts are incredibly inaccurate. From my perspective, the signal sent by many giant corporations that rushed out with write-offs related to the new laws simply amplifies the message that all these new regulations will cost a ton. Here's Rove's WSJ editorial:


So if one can't credibly assert that we'll save money with the new health-care legislation, then perhaps Obama, Reid, Pelosi and their cohorts can say with confidence that we will now get better care, and that they have unassailable evidence to support their conclusions. It turns out that the lawmakers did consult independent studies, including one from Dartmouth, but that this particular study is not only deeply flawed but also, it never intended to extrapolate health-care quality. Here's the opening paragraph from the NY Times article (of all places for this to be published!?)

"In selling the health care overhaul to Congress, the Obama administration cited a once obscure research group at Dartmouth College to claim that it could not only cut billions in wasteful health care spending but make people healthier by doing so."

And here's the bottom line as quoted:

"But while the research compiled in the Dartmouth Atlas of Health Care has been widely interpreted as showing the country’s best and worst care, the Dartmouth researchers themselves acknowledged in interviews that in fact it mainly shows the varying costs of care in the government’s Medicare program. Measures of the quality of care are not part of the formula."

If you want to read the full story (highly recommended) then follow this link:


Right now nobody knows whether the health-care situation will improve or deteriorate under the recent legislation, time will tell, I am not optimistic about it but I do hope for the best. But when elected officials, including the President use bogus and/or poorly vetted statistics to manipulate the results they are trying, a priori, to achieve, then we can properly impugn their motives and challenge their integrity, yet one more time.

Wednesday, June 2, 2010

Prevaricator In Chief

History dubbed Ronald Regan "The Great Communicator." I think that our President will in the future deserve a different moniker...Prevaricator In Chief. Here's why.

I listened to another endless monologue from President Obama this morning. He was at Carnegie Mellon University in Pittsburgh regaling the audience with all the fabulous progress we have been making in America, ostensibly under his (self-imagined) stellar leadership. I wondered why this guy so doggedly eschews press conferences while at the same time, he relishes making speeches like this by the dozen. Then it hit me. Obama isn't comfortable with the unstructured, open agenda that characterizes any president's session with the fourth estate. Media representatives have the nasty habit that they pester politicians with questions that one might rather not answer or that one may not have answers to. Obama absolutely loves to have answers, no matter how wrong-headed they are. Even more, he adores lecturing and moralizing on nearly any topic, no doubt with his trusty, able-bodied teleprompter in tow. However, more than anything, Obama cherishes that he can tell lies, distort facts, paint rosy pictures and in his "government is almighty" version of reality, pretty much get away with it all because of course, he and his minions know better than anyone how to fix everything.

Thank God that the President is a pretty poor prevaricator or he might actually be able to put one over on the American public. But his equivocation and dissembling are so overt that I suspect even his little daughter knows that her father is full of crap ("Daddy, did you plug the leak yet? No sweetie, but I'll stick my finger in it this morning, right after I'm finished shaving, I promise.")

Obama says the economy is getting healthier. Which parallel universe is he living in? Nearly 40 million people are now on food stamps for Christ's sake. The nominal unemployment rate is nearly 10% and the real one is almost 20%. Real estate foreclosures are through the roof to the extent that the courts are so congested that some folks just stop paying their mortgages and continue to live in the property for months if not years. The government is printing money and incurring debt at unprecedented levels, and if people don't understand that this is going to come back and bite them in the butt big time, then they deserve Obama's rhetoric. Check out 21 or so more reasons why the economy certainly isn't recovering by reading the following article:


Senior government stooges (undoubtedly at Obama's behest) recently uttered that "The government is in charge of the oil spill situation in the Gulf," or some such poppycock. The truth is that there is no one who can control this catastrophe because such an operation has never before been attempted at such depths...something someone should have thought about before they started poking holes deep into the earth. I fear that the real scenario could be that the Gulf of Mexico is permanently destroyed, that the oil may not stop leaking for a long time (way past August) and that cleanup efforts will never succeed in restoring things. Rather than have some Washington lackey assure the world that the relief wells that come online in August will "almost certainly plug the leak;" a statement that no reputable scientist would dare to make, I would grudgingly respect a spokesperson who emulated the grotesque colonel in "A Few Good Men" and said, "You want the truth? You can't handle the truth."

Obama is mendacious about the economy and deceitful regarding the Gulf. His wars in the Middle East are an abomination, admittedly inherited, but shamefully continued during his administration. The President misled us about his position before he was elected and thereafter, he deflected like crazy in carrying out his own war escalation.

The dishonesty in Washington and in particular, The White House, continues to sicken the population. Did they offer Joe Sestak a job or not? Well, go ask that famous truth-teller Bill Clinton. Is the health care legislation going to save or cost money? It depends on whose figures one believes. Are Republicans blocking important legislation or saving us from congressional-induced perils? Who knows, and who would believe any opinion on this anyway?

People, tea-parties or whatnot are utterly fed up with this disingenuous nonsense; I hope that in the fall they throw all the bums out. There isn't any baby in this rancid bath water.