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News Link • Economy - Economics USA

Black Swans: Oil blowout shows the risk of thinking the unlikely is impossible

For example, few people imagined in 2007 that U.S. real estate prices could all decline at the same time, and therefore assigned this event such a small probability that it was believed essentially impossible. Much uncertainty swirls around the rate of oil leaking from the blowout as well. Many refuse to accept that BP cannot calculate this characteristic of their own oil reservoir with any accuracy. They may know that Henri Darcy worked out the mechanics of fluid flow over 150 years ago, and that these mechanics allow the calculation of flow rate using, among other variables, the cross-sectional area of the flow medium, the properties of the fluid, and the drop in pressure across an opening to flow. Although BP engineers know the first two variables pretty well, knowing the third requires knowing the size of multiple openings in a buckled section of pipe now lying in a mile of water. It is as if one had to estimate the flow rate from a sink without knowing how far the faucet had been opened. So engineers are left with finding a solution to a problem that no one had imagined, the details of which they know only remotely.

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