The real lesson of the unravelling Gulf of Mexico fiasco is that the mega-corporations abuse their power, if given half a chance by light-touch regulation, just like the banks.   And the costs of dealing with that abuse of power can well run into hundreds of billions of pounds.

Why did the Deepwater Horizon disaster happen?   Because the health and safety regulations for BP (and of course for the other oil majors) have been whittled down to a point of almost complete ineffectiveness.   The safety standards on the exploded rig, owned by Transocean but leased to BP, were the responsibility of the Marshall Islands in the north Pacific becase all 35 Transocean rigs were registered there under the flag of convenience.   The aim was to scrimp on safety inspections.   As a US Congressman has just noted: “Coastguard inspection of a US-flagged mobile offshore drilling unit takes 2-3 weeks, but the safety examination of a foreign flag offshore offshore drilling unit takes 3-4 hours”.

Some 6,500 vessels currently sail under flags of convenience.   The aim is not just to pay cheap registration fees, but also to avoid taxes and employ cheap labour.   What is clearly needed  is an international treaty to ban flags of convenience and to take deterrent sanctions against countries – mainly small ones like Panama, Liberia and the Bahamas – if they continue to market their ‘flag’ as a convenient registration.

But it’s not just flags of convenience that evade proper safety scrutiny.   BP also spend £16m last year lobbying the US Government to minimise regulation, enhance political access, and obtain greater leniencywhere in trouble.   It paid off: it allowed BP to drill beneath the Deppwater Horizon rig at 18,000 ft. and another in the same Gulf at 35,000 ft., well beyond the point of technological know-how and safety.   This incredibly risky strategy is driven by the prospect of colossal profits (BP made £327 bn worldwide last year) combined with dangerous cost-cutting (25% budget cuts 1999-2005 at its 5 US refineries leading to the Texas refinery explosion in 2005 killing 15 workers) plus circumventing proper regulation and enforcement.

Big Oil, like the banks, continues to act like an alternative government.   The combination of its enormous financial muscle and its political collusion with the regulatory agencies and government departments of the big countries enables it to slough off angry protests from smaller nations and to get round any meaningful oversight and enforcement from bigger ones – at least till now.   If Obama means what he says abour holding over-mighty corporations to account, like the banks, this is now the next big power confrontation.

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