The oil spill

American politics

Democracy in America

The oil spill

Leakonomics

WASHINGTON, DC

IS THE BP oil leak in the Gulf of Mexico the Three Mile Island of our time? It was, oddly enough, BP's own board chairman, Carl-Henric Svanberg, who was one of the first to make the comparison (1:05 mark of the video).

Here in Washington, the comparison is drawn in the context of the expected policy fallout, as opposed to environmental damage—the oil spill is already much worse than the partial reactor meltdown on the banks of the Susquehanna river in Pennsylvania 30 years ago. No one died in Three Mile Island, and damage to the environment was considered minimal.

As bad as the BP leak is environmentally, though, it is unlikely to do to the oil industry what Three Mile Island did to the nuclear industry in America, John Cranford writes in CQ Weekly this week.

Public opinion turned against nuclear power after Three Mile Island. But it was the economics of nuclear power that changed fundamentally. New safety rules issued by Washington after the accident drove the cost of reactors up and up, and no new plants were ordered for 30 years.

Electric utilities could not take the risk that financial regulators at the state level would allow them to recoup their investments in nuclear power. In fact, for many plants in the works, the cost to retrofit them became too great, and the industry was left holding the bag. In some cases, investor-owned utilities were on the verge of bankruptcy, and taxpayers had to come to the rescue. This is why the nuclear rebirth now being discussed in Washington is so dependent on the prospect of federal loan guarantees—no company wants to go through that again without some sort of government support.

But in the context of oil, it's hard to imagine one event undermining the entire industry, even one this big. As Mr Cranford writes, oil is just too valuable, and we're just too dependent on the stuff to take a break from it, much less a 30-year hiatus. For context, he gives this statistic: $100 billion in damages would add only pennies to the price of a gallon of gasoline.

So whatever damage this episode does to BP as a company, it will be a drop in the proverbial bucket (or barrel), as opposed to some sort of industry game-changer like Three Mile Island.