From the Gulf of Mexico to Fukushima

When Deepwater Horizon, an oil drilling rig part-operated by BP, sank in the Gulf of Mexico following a powerful explosion and fire last year, spilling around 700,000 tons of oil and polluting the shores of Louisiana, Alabama, Florida and Mississippi, it was almost immediately dubbed an “oil Chernobyl.” The accident immediately sparked debate on the future of global energy. Governments started reaching for previously shelved nuclear power generation programs. Less than one year on, an earthquake hit Japan’s Fukushima nuclear power plant, putting the global energy sector at a crossroads yet again.

Two phobias clash

It is hard to tell for certain whether the threat posed by oil or that inherent in nuclear energy is greater and more dangerous. However, it is obvious that people find potential nuclear contamination much more frightening. True, the Deepwater Horizon accident caused panic and provoked wild speculation: even the anti-cyclone that brought the extraordinary heat wave to Russia and Europe was sometimes attributed to changing ocean tides triggered by the oil spill.

Yet, whereas the Chernobyl accident prompted a number of governments to wind up their nuclear energy programs, Deepwater Horizon had barely any discernable impact on oil producers. BP did not emerge unscathed: it was recognized as one of the responsible parties and had to spend nearly $40 billion to clear up the aftermath; its market value plummeted 40% in the first few months after the disaster.

However, neither the scandal itself nor the reputational damage it inflicted has prevented BP from finding common ground with the Russian government: BP reached an agreement with Russia’s Rosneft in early 2011 on joint offshore development in the Kara Sea. (

The United States was forced to somewhat rework its new energy policy in the light of the Deepwater Horizon tragedy. President Barack Obama’s administration suspended the issue of deepwater drilling licenses until the end of February 2011, leaving U.S. companies’ offshore production with a decline of about 13% this year.

On the other hand, the BP accident lent a forward momentum to onshore oil development and catalyzed energy projects such as shale gas that was always put off while there were cheaper and more accessible alternatives, and production of biofuel that requires innovative technological solutions.

Oil Vs. Uranium

The nuclear energy lobby gained a modicum of confidence, but not for long: the deadly earthquake that hit Japan and led to an accident at the Fukushima nuclear power plant has jeopardized the reemerging nuclear plans.

In March, Germany slapped a two month delay on the decision whether or not to extend the service life of 17 nuclear reactors for another 10 to 12 years. This decision did not gather a great deal of support in Europe, which is only natural because nuclear energy plays an important role there: accounting for 78% of total electricity output in France, 40% in Switzerland and 34% in the Czech Republic.

On the other hand, the U.S. oil lobby is very strong because 85% of the country’s power generation comes from fossil fuel. But despite this, nuclear programs can not just be “wound up” says Igor Krayevsky from the Otkrytiye financial corporation. First, it would be very difficult to compensate for the resulting energy shortfall. Second, canceling nuclear power programs would shrink the countries’ GDP. Finally, advocates of nuclear energy logically point out that Japanese reactors have withstood a magnitude 8.9 quake. Jere Jenkins from the School of Nuclear Engineering at Purdue University said none of the 11 nuclear power plants in northern Japan were affected. He believes that Japan’s mistake was building them so close to the shoreline, thus allowing the reactors to fall victim to the tsunami.

Still, whatever the arguments in favor of nuclear power, Japan’s unfolding tragedy has played into the hands of the oil lobby. It has even gone some way to helping crude producers regain their pre-Gulf of Mexico positions.

The post-crisis surge in oil prices, which was triggered more by U.S. financial policy than the violence in the Middle East and North Africa, has made developing difficult deposits, including those offshore, attractive once again. Moreover, as the global oil price closes in on $150 per barrel, even shale gas and biofuel projects seem quite lucrative.

The views expressed in this article are the author’s and do not necessarily represent those of RIA Novosti.

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