Politicians' reaction to the Gulf of Mexico oil spill been predictable to say the least. In the two-party system that dominates U.S. politics, one party is viewed as being a friend of ''big oil'' and the other is far less accommodating. The latter holds stout majorities in both houses of Congress (at least for now) and controls the White House as well, so while the timing of any oil spill would be bad, the timing of the Gulf spill is particularly bad for BP and friends because they will have to contend with a group of unfriendly politicians eager to pander to their constituents because 2010 is an election year.
As stated above, what has ensued in Washington in the wake of the spill has not surprised anyone, at least not any investor that also actively follows politics. President Obama has said he intends to form a commission to investigate the spill. The Interior Department has, at least temporarily, halted granting new leases for offshore drilling.
Of course we cannot forget the dog and pony show that starred a Senate committee and executives from BP (BP), Transocean (RIG) and others. Congressional hearings into matters involving big business are usually wastes of time that never prevent the event under scrutiny from happening again.
Enron executives spent plenty of time on Capitol Hill, but those proceedings did not prevent the near collapse of the U.S. financial system at the hands of specious financial products. And when the next batch of complex financial products roils financial markets in 10 or 20 years, we will be able to say that trotting Jamie Dimon and Lloyd Blankfein out to the Hill was less than effective. Same goes for Toyota. Grilling those executives will not prevent future automobile recalls.
The hearings are not the end of the Congressional foolery stemming from the tragedy in the Gulf. Last week, the six senators representing California, Oregon and Washington proposed a bill that would effectively end offshore drilling in their states' coastal areas. Regardless of how one feels about offshore drilling, this legislation is sophomoric and transparent. Three of the six senators co-sponsoring this bill are up for reelection this year. That should be strike one against this bill.
Strike two should be the fact Oregon and Washington are not exactly Alaska and Texas when it comes to oil production. In fact, three separate sources, the U.S. Energy Information Administration, Statemaster.com and Wikipedia, list the U.S. states have some oil production. Oregon and Washington are nowhere to be found on either list. In effect, this bill would be a ban on nothing for those states.
California's fiscal plight combined with a tough reelection battle for Barbara Boxer, one of the bill's sponsors, should be strike three against the proposed West Coast drilling ban. Unemployment in California is above the national average and the state's fiscal situation would make even Greece blush, so banning offshore drilling in California cuts off a source of tax revenue and serves as a diversion tactic to help a politician win another term.
At the end of the day, this bill MIGHT mean something if it was coming from the Alaska, North Dakota or Texas congressional delegations. Alas, it is not and this bill amounts to nothing more than election year shenanigans.