The government’s hidden role in the BP oil spill

May 17th, 2010 10:44 am  |  by  |  Published in Big Government, DownsizeDC.org, energy, Environment, Market Regulation, Politics  |  1

Quote of the Day: “Government’s view of the economy can be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” — Ronald Reagan (paraphrased)

The politicians meddle with everything. For example, when it comes to energy production there are . . .

* Direct subsidies
* Tax breaks and tax penalties
* Liability limits, but also potential fines if you don’t do things just right

What a meddling muddle! This is why . . .

It’s fair to say that the federal government played a hidden role in the BP oil spill. To learn more read the sample letter to Congress below.

We think it would be better . . .

* For oil companies to pay all the costs and carry all the potential risks of each drilling project
* To have all of these costs and risks reflected in the prices consumers pay, rather than hidden in legislation and regulations

In other words, there should be . . .

* No subsidies or special tax breaks
* No liability limits
* No tax-funded bailouts, or government run clean-up funds
* And regulations should be provided by insurance companies who are putting their own money at risk

If, after reading the sample letter to Congress below, you agree with us that this approach would better protect both the environment and the taxpayer, then please send Congress a letter telling them that. You can use DownsizeDC.org’s No Bailouts campaign to send your letter.

You may borrow from or copy this sample letter . . .

The BP oil spill is another example of the destructive nature of government guarantees and bailouts.

I know that BP has agreed to pay more of the clean-up costs, beyond the government-provided liability cap. I also know that they’ve been threatened by Congress and the Administration if they don’t. But this is hypocritical, because Congress created the liability cap and the clean up fund in the first place! In 1990, Congress passed a law that . . .

* capped oil company liability for spills at $75 million
* set up a fund, paid for by the oil companies, to pay for the rest of the clean-up

In effect, this is a government-run oil spill insurance program, but without the risk management incentives provided by real insurance companies. This whole scheme was a terrible idea from the start, and has been used to bail out companies that cause oil spills a whopping 51 times! http://www.nytimes.com/2010/05/02/us/02liability.html

Because of the liability cap, BP may have been less cautious than it would have been if its own money had been at risk.

In addition, a lack of regulation has been blamed for the BP spill. But government regulators . . .

* don’t have the profit and loss incentive that private insurance companies do; they don’t go out of business for their mistakes
* tend to impose one-size-fits all rules that don’t work as well as the site-specific requirements that insurance companies impose
* and often act as partners in the industry they regulate, not as watchdogs http://www.thefreemanonline.org/columns/tgif/bp-spill/

But imagine if we had a free market in energy . . .

* Oil companies would be liable for ALL the damage they cause
* And this would compel them to seek liability insurance in the private market

In turn, insurance companies would . . .

* demand the strictest standards to prevent accidents and spills because, unlike government regulators, they would be financially responsible for any mishaps
* and, if the risks are too great, they would deny coverage

If off-shore drilling is too risky, that means no one in a free market will invest in it, and entrepreneurs would then have a huge incentive to develop less-risky energy alternatives. This would be a good thing! This is what you politicians claim to want!

This means that a true free market in energy would actually reduce accidents and CREATE A CLEANER ENVIRONMENT.

I therefore demand that you put an end to government meddling in energy production.

1) Instead of raising the liability cap for oil spills, remove all government liability caps on all forms of energy production
2) Instead of inefficient and counter-productive government regulations, allow private insurance to set requirements for off-shore oil drilling and other forms of energy production, such as nuclear, which is also currently protected by government liability limits
3) Get rid of all subsidies, tax breaks, and tax penalties so that we can benefit from free and fair competition among all energy producers

Once these three market-based policies are in place, energy companies will bear the true capital expense of their projects — instead of the taxpayers. Risky and dangerous projects will flop. But profitable projects should be allowed to proceed — including drilling for oil.

END LETTER

You may send your letter using DownsizeDC.org’s Educate the Powerful System.

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Thanks for helping to Downsize DC!

Jim Babka
President
DownsizeDC.org, Inc.

D o w n s i z e r – D i s p a t c h

Official email newsletter of DownsizeDC.org, Inc. & Downsize DC Foundation.

Responses

  1. bob perci says:

    May 18th, 2010 at 3:01 pm (#)

    there is no such thing as private insurance for oil companies! Duh! They have to self insure.

    In case you haven't noticed they are too big to fail.

    The government has to have the taxes from oil companies to survive, this is the false economy that the stupid leaders have built for the people.