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Oil Liability Cap and Exxon Mobil’s Soaring First-Quarter Profit

May 6, 2011

Courtesy of steadyhabits.blogspot.com

In response to the 1989 Exxon Valdez oil spill, Washington in their infinite wisdom conjured up a law to essentially hold harmless oil companies that destroy the environment. Thus arose “The Oil Pollution Act” of 1990. Interestingly enough, the bill was introduced by a Democratic congressman, approved by a wide margin by both the House and Senate, and signed into law by President George H. W. Bush.

Fast forward to British Petroleum’s 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Whether to calm voters over high petroleum prices or truly do the right thing, there has been a yearlong debate on Capitol Hill to raise the Act’s $75 million cap limit on spills to $10 billion. Not sure the rationale for having a limit, but wonder if the oil companies would even be insurable without the cap.

It was reported that Exxon spent more than $3.8 billion in cleanup costs, fines and compensation. This may just be the starting point for BP. In context to the environmental damage from the spill, it seems silly even to limit the liability to $10 billion. Why should the taxpayer cover the cost of their ineptitude and mistakes? Surely this limit won’t be much help to the families who lost love ones on the rig and the unseen effects for a long time to come.

To add insult to injury, Exxon Mobil is trying to justify its huge first-quarter profits. No one likes high petroleum prices.  But on the other hand the average American is not too happy hearing Exxon is pocketing such large sums at their expense and at the expense of the environment.

One would argue, without the $4 billion a year in subsidies and other hidden cost such as this limit on liabilities, the pain at the pump would be intolerable. Leaving the companies exposed to the realities of the market would finally induce changes in consumer behavior. Our perpetual thrust for petroleum would dry up. Even with the shelves fully stocked with unsold barrels, lowering the price to entice us once again to fill’er up with black gold, would be corporate suicide with the companies finally having to pay what is rightfully their cost.   Let them pay the piper, not me.

Possibly that’s what’s needed!

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One Comment leave one →
  1. May 10, 2011 3:09 AM

    Hi Barry,
    I hope you will forgive me saying this, but in the US you are having an easy ride of gasoline prices compared to Europe. In effect, US businesses operate on a massive state subsidy relative to European countries where the tax on fuel is much higher than it is in the US.
    If in a dream world it was possible (ie. Senators from car making and petroleum producing States were fast asleep) for tax laws to be passed placing US taxation on a par with that in Europe you guys would actually change your buying considerably, if in part because the economy would go into a massive recession now it has been exposed to the truer economic cost of gasoline consumption.
    Until that happens, America will continue to celebrate US built cars that can achieve 20 mpg and continue to be the single biggest problem for Global climate change by some distance with successive US governments resisting signing up to Global warming protocols for fear of the impact on US industries who are protected from equal competition in the World market by having one of the lowest rates of tax on petroleum products.
    Arguably, despite the number of coal powered electricity generation stations being built, China is a more responsible member of the world community in this regard, which should worry right thinking North Americans.
    In Africa we see a ballooning demand for energy in the next 10 years and the conundrum is how to achieve that without becoming substantial Global warming contributors because it is Africa that is on the Global warming margins – the Sahara is already spreading south at an alarming rate, admittedly as much because of de-forestation as Global warming but happening none the less.
    With the potential to feed not just itself but also the wider world, Africa is right at the sharp end of these issues in that marginal land will become desert if Global warming accelerates, which in turn further squeezes energy demands in Africa and cuts down Africa’s ability to build a viable agricultural economy.
    Its too short a forum to get into this in too great a detail, but it was good to read your web page here as I see you have worked hard to do your part in addressing these concerns. I wish you every success in your endeavours.

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