Valdez is the home of the southern terminus of the Trans-Alaska Pipeline, America's northernmost ice-free port, and the namesake of America's second-most devastating oil spill. The supertanker Exxon Valdez (named after the town) ran aground on its way out of Prince William Sound, spilling a massive amount of oil into the sea. There was a devastating environmental impact with iconic images of birds and sea-otters covered in oil (much like Conan O'Brien's "chocolate pelicans" seen on the news today).
As devastating as the oil spill was, Exxon paid the cost of the cleanup, lost fishing revenues, and environmental damage (the calculation of the latter is one of the milestones of Environmental Economics). Exxon damaged a public good, and should most certainly bear the cost of the damage. These costs were ultimately borne by the consumers of oil, but that's exactly how it should be.
The news of the BP gulf oil spill was first reported to us in a sat phone call with Mr. Poole's sixth grade class during our crossing from Galapagos to Marquesas. Since then, we caught little tidbits of the news, but didn't really comprehend the extent of the damage until we watched CNN in Pago Pago.
Water quality obviously hits close to home for me. I live on the ocean, and human impact is very evident - offshore, we can almost measure our distance to land by looking at how blue the water is. In the middle of the ocean, the water is unbelievably clear. It's amazing to jump in, look down, and see your shadow disappear into the depths. A clean ocean is a valuable thing.
I've never sailed in the Gulf of Mexico, but my brother has. He spent time in Galveston, Texas, and he's told stories of his many adventures and regattas. One story he's told is about a place called 'The Graveyard.' This is a part of the Gulf with many old oil rigs and well-heads, some only sticking a few feet above the water and posing a danger to shipping and sailboats. Before the BP spill, this was the one of the greatest negative impacts of offshore drilling.
One of the strongest points taught in Environmental Economics is that there is an optimal and acceptable level of pollution. This can be calculated using many of the econometric tools available to economists and policy makers (take a read through my dissertation at www.lib.ncsu.edu if you want to learn more). It is possible that skeleton rigs and well-heads are an acceptable byproduct of offshore drilling. A massive oil slick is another story.
I'm not familiar with environmental economic research that has looked at the impact of oil spills besides the Exxon Valdez papers (life on a boat keeps me out of touch from current events and new academic research), but I think it would be hard to show that the current oil slick in the Gulf of Mexico could be optimal.
The news we watched in Pago Pago showed BP getting a lot of flak (as they should for damaging a public good), but I'm also confidant in America's legal system and the academic economic community's ability to nail down a dollar value for the social cost of the BP oil spill.
Just as in the Exxon Valdez disaster, BP will end up spending a lot of money on clean-up, damages, and settlements. As a result of these and new drilling regulations, we should expect the cost of gas at the pump to go up.
We may flinch at higher gas prices, but watching the events occurring in the Gulf should help us to understand the total costs of drilling and transporting oil. The risk of environmental damage is extraordinary, and higher prices at the pump will reflect the cost of doing business.
And if higher gas prices pose a problem - you as a consumer have an easy alternative for reducing your expenditure on gasoline:
drive less.
The rest of the ocean will thank you.