It shouldn’t be a surprise that the BP chief executive Tony Hayward, surrounded by a mountain of legal advice and lawyers, sounded guarded when he appeared before congress yesterday. This disaster is now as much about corporate governance as it is an environmental nightmare. Arguably, if it was not for the congressional hearing and allegations of anti-British behaviour, the issue would have already dropped down the media schedule in the face of the world cup. Earlier this week I caught a short piece on the BBC about leaking oil in the Niger delta that had been going on for years but until now had attracted very little media attention.

Our first response should rightly be empathy with those communities facing ruin and months of pain during the clean up and concern about damage to the environment. In the face of intense pressure in the United States BP have agreed to bring forward $20 billion in compensation, although this has been described by the White House more as a down payment rather than their total liability. In contrast the British media response has focused on the financial threat to BP rather than its environmental and social obligations.

The reality, however, is that these kind of disasters are more likely in the future as exploration is forced into riskier territory. We need to face up the fact that easy access to oil is gone. Each new exploration brings with it new risks in deeper oceans and harder to reach locations. The risks become even greater with the tendency of much of the oil industry to outsource exploration to small specialist companies at one step removed from the culture and responsibilities of the larger players. It is only natural that the key to these contractual relationships will be reducing overheads and returning shareholder value.

More significantly the disaster raises questions about our ongoing addiction to the oil-based economy. Unless we are prepared to seriously address our reliance on fossil fuel production – and to do so quickly – then the quest to explore and find new oil sources will remain. In late March President Obama dismayed environmental and energy campaigners by announcing plans to ease the ban on oil and gas exploration off the US coast overturning a moratorium that had been in place since the 1980s. The Republicans would like to go even further and commence drilling in Alaska. Closer to home, UK-Argentine relations were strained at the start of the year with the start of exploratory drilling around the Falklands Islands.

On a more strategic level, the disaster illustrates the difficulties in defining the limits of accountability when dealing with such large global corporations like BP. Where does the public interest sit in different parts of the world when we have such a global economy?

The level of risk involved in oil exploration also raises interesting questions about institutional investment and pension funds. It is incredible to think that £1 out of every £7 paid in dividends to UK pension funds comes from BP. It is also unnerving. The link between risk and investment would benefit from much greater transparency and better understanding of how pension funds work. After all, it is our money. We need our pension fund trustees to be asking much tougher questions about the level of risk involved in their investments. The alternative is accepting that we are willing to turn a blind eye to the kind of environmental and social consequences we are now seeing in America in the name of making a good return.

If we want to achieve our tough carbon reduction targets the heavy lifting needs to happen over the next five years. The first steps towards a low-carbon economy will always be the most difficult with new investment, major research and application in technology required. But underlying all those changes is the need  to reassess our relationship to oil.

Photo: SkyTruth 2010