With the Gulf oil spill still on going, more and more people are calling for litigation against BP and that this incident is an example for why we cannot companies to self regulate.
Can I just say I love the irony of the government saying that a private company cannot be trusted to self regulate, when the United States government with a debt how high (US Debt Clock.org)?
But, of course, a private company is very different from a government, so we cannot truly compare the two. A company cannot print their own money. The highest politicians in the government of the United States of America are affectively guaranteed jobs for 2, 4, or 6 years, while corporate officers can be fired. Selling your stock in a company has the immediate affect of showing your distrust or dislike of the company, while all you can do is move out of the country to escape it. You can also boycott and protest a company, but violate laws, and you can go to jail. Yeah, completely different. A company can be regulated by the masses everyday, our government, not so much.
Many are calling for more and stricter regulations on BP, claiming the current ones are not cutting it. Of course it is worth pointing out the current ones are not being enforced, but that comment can remain at that. Those same people are saying that the method of so-called “self-regulation,” is not working, as this spill did happen. Let us examine this claim.
When was the last time there was such a major oil spill in the USA?
- The Exxon Valdez oil spill was in late March 1989, twenty one years ago. That was 10 million barrels minimum of oil spilled.
- In 1990 5.1 million spilled near Galveston Texas.
- 1993, three ships collide near Tampa Bay, spilling 336,00 gallons.
- 2004, a storm pushed a ship into a rocky shore and let 337,000 gallons of oil spill.
- 2005, Katrina hit the Gulf of Mexico and caused some 7 million barrels of oil to spill.
- 2006, Louisiana, some 71,000 barrels of oil were spilled during a storm.
- 2008, two boats collide causing 420,000 gallons of oil to spill.
- 2010, Gulf of Mexico, 20-40 million barrels of oil, and counting.
Oil Spills and Disasters timeline
Size of 2008 spill found at http://www.piersystem.com/go/site/1794/
Obviously major spills do not happen often, and such man made disasters even less (of those listed, only the Exxon Valdez and the current spill are both major and man made). The largest caused by nature was Katrina.
Twenty one years with only two major man made disasters does not seem too bad to me, especially for the faulty self-regulation system.
People are not just calling for an end to self regulation, they are also calling for the punishment of BP. I naturally support a punishment for all those that broke the law, but what people are asking for is not just punishment, but revenge. They are seeing BP as something evil to be the cause of all this harm, but let us examine that.
One estimate puts the eventual cost for the cleanup at 35 billion dollars ($35,000,000,000). Surely compared to a big evil oil company that’s a drop in the barrel (I could not avoid that pun). Indeed, BP had a revenue the past year of 234.8 billion dollars ($234,800,000,000). Drop in the barrel, right? For those of you that know the basic terminology of finance, you should have spotted the issue with this statement. For the rest of you, revenue is total amount of money brought in, but not saved. That amount is how much BP earned before paying salaries, insurance (which is apparently an in-house company, Jupiter Insurance LTD), taxes, operating cost, and many other things. Their actual income from the past year, 9.125 billion dollars ($9,125,000,000). That is almost a fourth of the estimated cost. (35/9.125=3.8356). If BP were to continue making that annual profit, they would need almost four years to recover the loss.
Still think self-regulation is a failure? Try this. On January 19, 2010 BP had it’s highest stock value this past year of $62.32. As of yesterday, June 1, 2010 $36.52, and today $37.66, so it went up $1.14. As some companies will essentially live and die by their stock values, this does not look good for BP continuing to exist.
Is self-regulation a failure? Maybe the families of those that died on the oil rig have reason to think so, but for the rest of us, it is looking like that system works fine.
