Apparently, BP’s well cap on Deepwater Horizon is holding, as the closure of the well cap plays a role in testing the device itself. The cap will stay closed for only a short time, then oil will be allowed to flow to surface ships again while relief wells are drilled into the deposit. One of the relief wells is currently a very short distance (several meters) from the shaft of the main boring.
The relief wells can probably be doing their job by mid August. So, over the next month, oil will continue to be “processed” on the surface (which I assume means that much of it will be burned, but I’m not certain of this). The possibility of the well cap failing and a new deep sea leak starting up will remain a strong possibility between now and then.
Despite the fact that the effects of one of the worst environmental disasters ever are still mainly in the future, BP stock’s rose on news of the successful test closure of the kill valve on this cap. If we ever needed proof that the invisible hand of the free market is an imbecile, this would be an excellent example.
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I can think of lots of examples where the free market is an ass. The fact that BP was allowed to work so cavalierly being a prime one.
But this change in BP’s chare price isn’t one of them. The bump up reflects the view that there is now less uncertainty about the course of the disaster. “Less uncertainty” doesn’t mean a) no uncertainty or b) that the effects of the disaster won’t stretch out into the distant future.
My guess is that BP stock is up because investors were thinking it to be nearly worthless before and they now have some hope. The rest of the market is down at the moment (Dow down 165 points, indices down around 2%).
Russel, it is a good example because turning that valve was the beginning of a phase of this process that has nearly maximum uncertainty.
Turning off the kill valve has a number of different possible outcomes, one of them, and not entirely unlikely, is that the well blasts itself a new fissure. That happens. If it happens on land, you get a messy oil lake. If it happens here, you get a leak that simply can never be stopped. Ever. All you can do is try to out-pump it.
No, this is not a reduction in certainty at all. What the stock market has done is to hear “Stopped” and then the stock market went “Oh, shiny, shiny news story, oooh ooh” and the price went up just as all the execs at BP, the US coast guard, and the EPA drew a long deep breath, crossed their fingers, and are now waiting for the other shoe to drop.
The free market is grinning stupidly.
Greg, where do you think the new fissure would originate, that the relief well couldn’t intercept the bore below it? Some of the worst case scenarios spreading on the intertubes are pretty implausible, assuming in essence that the well just happened to run along and collapse a weak structure that ran all the way from the sea bed to the reservoir.
BP buys up Gulf scientists for legal defense, roiling academic community
http://blog.al.com/live/2010/07/bp_buys_up_gulf_scientists_for.html
“More than one scientist interviewed by the Press-Register described being offered $250 an hour through BP lawyers. At eight hours a week, that amounts to $104,000 a year.”
Greg, where do you think the new fissure would originate, that the relief well couldn’t intercept the bore below it?
I have no thoughts on the matter whatsoever. I am aware of what can happen, and I’m aware that those involved in the operation are concerned with this scenario. I am not in possession of any geophysical data.
Anyway, intercepting a bore below a breakout into some side fissure ma or may not be effective in stopping 100% of the flow through tat fissure.