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Home Publications Blogs Beat the Press White House Energy Advisor: Small Oil Firms Depend on Government Handouts to Survive

White House Energy Advisor: Small Oil Firms Depend on Government Handouts to Survive

Saturday, 03 July 2010 19:51

That is not the way the Wall Street Journal reported it, but this in fact what it effectively quoted White House Energy Advisor Carol Browner as saying. The piece is headlined: "Smaller Oil Firms Might Exit Gulf."

The item at issue is the $75 million liability cap that the government currently imposes for spills from offshore drilling. This cap effectively means that taxpayers are paying for the insurance for oil companies that drill offshore. The article reports that the smaller oil companies are complaining that they would not be able to compete if they had to pay for their own insurance.

It would have been helpful if the article had made this point more clear to readers. While there are arguments that the government should pay for items like education for children or fire protection, it is not clear what the argument is that government should pay for insurance for oil companies that cannot compete effectively in a free market.

Comments (4)Add Comment
written by izzatzo, July 03, 2010 9:27
Oil prices are too high for the same reason health care costs too much. Malpractice insurance.

Perverse incentives cause oil companies to overprotect themselves from lawsuits with excessive safety measures, like ordering way too many overpriced MRI scans of the ocean floor before drilling a deep well when no scans were really necessary.

Trial lawyers who chase ambulances and unemployed fishermen for a living are behind the $75M liability cap, because the government as third party pays higher prices for too much insurance which creates a moral hazard to take more drilling risks followed by accidents and lawsuits. Trial lawyers are bringing down the oil industry the way they did the health care industry.

Removing the liability cap will result in even more accidents by smaller companies which will have to work twice as hard as large ones to make the insurance payments and take even more risks to do it, so trial lawyers are enriched either way, cap or no cap.

Stupid liberals.
written by skeptonomist, July 04, 2010 9:03
See a featured piece in the NYT:

written by Erich Riesenberg, July 04, 2010 9:40
I suppose one good thing about the BP Spill is that it is the BP Spill and not the Shell Corp Spill.
written by Erich Riesenberg, July 04, 2010 9:40
By shell I mean no assets...

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.