The Paradox of Deep Water: Lots of Oil, Lots of Danger

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"As the industry goes further offshore, the level of investment in research has to be comparable for cleanup as for exploration," says J. Robinson West, chairman of Washington-based consultants PFC Energy.

More Oversight

It's become clear that the industry has no surefire way of dealing with problems on the sea bottom a mile below the surface. That's one reason some environmentalists are already arguing that deepwater drilling should be banned outright. "Disaster response plans are totally inadequate," says Athan Manuel, lands protection director at the Sierra Club. "There is no such thing as safe offshore drilling."

Still, with global energy demand estimated to grow by up to 18 percent in the next 10 years, energy producers will have no choice but to exploit oil deposits under thousands of feet of water, says Robert Fryklund, vice-president for industry relations at consulting firm IHS (IHS).

That's why the Macondo mess may lead to stiffer requirements designed to reduce the likelihood of future accidents rather than a drastic reduction of offshore activity. On May 11, Energy Secretary Ken Salazar announced moves to toughen inspections and oversight of offshore drilling rigs. The Obama Administration had already announced a 30-day moratorium on new drilling permits and that it would separate the safety operations of the federal Minerals Management Service from its royalties and leasing functions.

The Administration hasn't publicly backed away from offshore drilling. That stand will be put to the test as congressional hearings continue into safety procedures used by oil companies—or if the growing spill begins to foul the U.S. coastline rather than just the sea itself. "This will always be a risky industry," says John Hofmeister, a former president of Royal Dutch Shell's (RDS.A) U.S. business. "There is going to be constant scrutiny of how much risk for how much gain."

The bottom line Oil companies like BP have plenty of experience drilling in deep water. They're still relative newcomers on dealing with disaster.

Reed is London bureau chief for Bloomberg Businessweek. Carroll is a reporter for Bloomberg News in Chicago. With Rachel Layne and Jessica Resnick-Ault.

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