Tuesday, August 3, 2010

Response to the BP Oil Crisis

The BP oil spill was created when an oil rig exploded. The cause of the destruction has been determined to be nothing more than an accident. The oil spill continued to rage for months. Various companies and organizations have been accused of being involved with the oil spill, but many Americans, as well as American politicians, assume that the majority of the blame should go to BP itself. The anger that is directed towards BP should be placed on the federal government, as the government's interference with the oil industry is the cause for the oil spill.

It is important to note that, by definition, accidents are never intentional. BP did not destroy its own rigs due to some sinister motive. In fact, BP is suffering as a result of the oil spill disaster. BP's stocks have plummeted, individuals have lost confidence in the company, and it has decided that it will cover all of the costs associated with clean-up and damages. Overall, gas prices have skyrocketed as a result of the crisis, causing anger to be directed towards BP. BP is clearly being punished by the free-market as the consequence of the oil spill; therefore, there is no need for government to "put the boot" on BP.

The government, however, is responsible to BP's error as well as the spread of the oil spill. Due to the numerous regulations that the government places on oil industries, the industries are able to take excessive risks, yet be subjected to strict regulations in the case that the government feels as if they did something "wrong". The federal government subsidizes the oil industry, which forces the companies that take the money to abide by harsh regulations. Companies that receive subsidies are more likely to take risks than those that do not receive government assistance, since the government is the one supplying the money as opposed to the company paying for all of its operations at its own expense. While it cannot be determined whether the oil spill was created due to a risk, accidents are surely the result of risks. BP is actually being altruistic in the fact that it is covering both the liabilities of the oil spill and the clean-up costs; the government only mandates that environmental liabilities be paid up to $75,000,000, but BP is willing to pay every single fee (the liabilities are calculated to cost an upwards of $100,000,000,000). The government is also responsible for the spread of the oil because it determined that BP was incapable of solving the problem on its own. The government took the authority away from BP to clean up its own mess, and replaced it with government-engineered responses. The solutions that the government has tried were slowly adopted and proven inadequate. If left to its own, BP has the capabilities of solving the oil spill. BP knows the severity of consequences that were created as a result of the spill; therefore, it has a desire to find the most efficient means by which to fix the spill. BP has the drive to find the fastest course of action to solve the problem at the lowest cost, which will save it time to rebuild its reputation and money that would be spent on capital. The government, however, is incapable of determining what is the best solution the problem. The government is an entity in which monetary value does not matter, so it does not care how much it will cost to fix the problem. The government can also benefit from the negative publicity that BP is receiving in order to further an environmentalist agenda and push for stricter regulations on the oil industry. This proves that when the government mingles in to affairs that private businesses can handle on their own, disasters become catastrophes.


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