Author’s Note: I am grateful to the many drilling and completion engineers that consulted with me on this post to arrive at plausible explanations and interpretations of what happened in the final hours on the semisubmersible drilling rig Deepwater Horizon in the Gulf of Mexico. The analysis that follows is based on these discussions as well as my own 32 years of experience as a geologist working in the oil and gas industry.

It is early in the process of discovering what really happened. Because of the gravity and potential impact of this disaster on the nation and my industry, however, I wanted to provide an early and more investigative perspective than much of what has appeared in the media to date. The risk, of course, is that more information will invalidate some of what follows. I, therefore, wish to clarify that this is a fact-based interpretation of what may have happened on the Deepwater Horizon on April 20, 2010 but, in the end, it is an interpretation. — Art Berman

The blowout and oil spill on the Deepwater Horizon in the Gulf of Mexico was caused by a flawed well plan that did not include enough cement between the 7-inch production casing and the 9 7/8-inch protection casing. The presumed blowout preventer (BOP) failure is an important but secondary issue. Although the resulting oil spill has potentially grave environmental implications, recent efforts to limit the flow with an insertion tube have apparently been effective. Continuous efforts to slow or stop the flow include drilling two nearby relief wells that may intersect the MC 252 wellbore within 60-90 days.

Growth is only possible when energy flow is increasing. It is pretty simple really. When energy flow is increasing in each subsequent time period it is possible to increase the amount of work devoted to increasing the asset base of society. Alternatively, if the energy flow is decreasing... Short of a miracle (let's pray for it!) energy flows are about to decline in a serious way. And as a result growth is an utterly fatuous notion. Unfortunately, the majority of the population, and especially the economists and politicians, don't get it. The economists still firmly believe that if energy costs (oil, coal, etc.) rise as a result of constraints on production then we will simply substitute other sources (wind, solar PV, etc.) and keep going as we have been for the last two hundred years. This is both stupid and foolish. It is a complete failure of intelligence and wisdom. Over the next several decades we (humans) will have to change our understanding of what is feasible and what we need to be doing to have a future. The future does not include growth of the GDP or profits. Capitalism as it has been practiced in the 20th century and now hanging on in the early 21st century is dead. Or rather, at this juncture in history, it is moribund. It served its purpose to raise mankind's understanding of what is possible in this world. It was a necessary step in the evolution of knowledge but its time has come and gone.

Even if you are a staunch proponent of U.S. biofuel policy, it is hard to argue that the current subsidy on grain ethanol serves the purpose it was designed to serve. Further, it does not help ethanol producers compete against oil companies. Why? Because we now have mandates. As I will explain here, this nullifies the purpose of the subsidy.

But first, how did we get to this point? In an effort to spur development of a domestic renewable fuel industry and wean the U.S. off of foreign oil, the U.S. government introduced tax credits for ethanol usage with the Energy Tax Act of 1978. The tax credit was an exemption to the Federal Excise Tax on gasoline, and amounted to $0.40 for every gallon of ethanol blended into gasoline at the 10% level (increased to $0.60 per gallon in 1984 and gradually decreased to the current level of $0.45 per gallon).