the corner office

a blog, by Colin Pretorius

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BP

The BP oil spill is a disaster and of course BP should be held liable for the damage it's caused, and those who've incurred losses or seen their livelihoods destroyed by the oil spill deserve to be fully compensated. And what's more, if people were criminally negligent then by all means throw the book at them and throw their sorry asses in jail.

At the same time, some perspective isn't a bad thing. Who is BP exactly? There's no such thing. There are just people: BP employees, and BP shareholders, and BP customers. And while employees and shareholders will take a knock, (and let's not forget that just about anyone who saves into a pension fund is probably a BP shareholder), a lot of the losses will also be recovered from customers. BP will try to push up prices to recover the losses (and only be held in check by competition, such as it is), and all oil companies will be incurring more costs (and therefore pushing up prices) to upgrade dodgy equipment and invest in recovery technology and deal with the inevitable increased regulation.

The simple truth is this: it would undoubtedly be quite feasible for oil companies to make their oil rigs much, much less likely to cause these sorts of spills. The only problem is, it would make petrol much, much more expensive. Now the proper free market view is that this is right and proper: destroying ecosystems and leaving entire regions economically devastated is a huge third party cost that should be included in the cost of petrol and if that makes petrol ridiculously expensive then tough bloody luck, and all the more incentive for people to find cheaper alternative fuels sooner.

Yet I have no doubt that if petrol prices did double or triple, governments would be stepping in pretty bloody quickly to keep the baying mobs happy. So when people say 'BP must pay', what most of them really mean is 'BP must pay, but not too much'.

{2010.06.01 - 17:07}

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