Weak Oil Spill Contingencies: A Government Failure

Jun.14.10 | About: BP p.l.c. (BP)

Companies should be held accountable for safety and operational errors.

But there are non-market costs, outside a company's ability to finance and still compete in its market. It is the duty of governments to identifying non-market costs, assess fees in advance, allocate adequate resources and deal with crisis:

  • Fire departments, militaries, police forces all provide non-market services that are essential to the "general welfare and common defense."
  • Banks pay into the FDIC to create fund to assure bank failures do not create a run on all banks.
  • Drivers must carry proof of insurance to legally drive cars.

In the case of the BP oil spill, BP should be held accountable for the accident and the first week of the spill. But the delay in closing the leak is entirely a government failure. Had the government been competent in its duties, it would have assured adequate safety and emergency response procedures were well capitalized prior to issuing permits. The government or a "fire department company" would have collected a fee for every gallon of gasoline purchased and assuring a well funded, well practiced response was available within days of an accident.

Congress and the President should immediately pass a bill that taxes 10 cents a gallon, or some number, to fund oil spill "fire departments" of well trained crews and effective equipment to deal with oil spills. In view of the poor performance of the government Minerals Management to assure adequate contingency procedures, commercial "fire departments" would create competition to create the best contingency systems and fastest response times.

The federal government's failure to assess non-market costs for using fossil fuel is a major reason renewable energy sources, which do not have these costs, have been uncompetitive.

Disclosure: None