The libertarian's guide to externality costing. What do we do about the oil spill?

S

speedracer

Banned
So the little platform that could is dumping a metric ass ton of oil into the gulf and is going to crap all over Louisiana in a way that could potentially take decades to fix. After a complete inability of the oil platform owner or downstream buyer (BP in this case) to stop the bleeding, the government has stepped in and is trying to wrangle this thing. There's talk of setting it on fire to try to burn it up before it hits the gulf states coasts. I think I saw that the spill was up to 40 miles by 80 miles, for a total of 3200 (!!!) square miles.

I often try to bait our more conservative and libertarian members into a debate about externalities but with little success. Obviously this is beyond the ability of a corporation to handle and is wildly cost ineffective. Is it not the most market efficient method at this point for the platform to declare bankruptcy and socialize the cost?

So what liability should who have?

The spill as seen from space (remember this is two days old now):

oilslickfromspace.jpg


Ideas?
 
If we, the US gov, could fix it then we charge them a bill for the cleanup. Same thing happens when you start a forest fire and can't put it out yourself. Either that or jail time.
 
if this was 3200 square miles of corn, it wouldn't be so bad.

I agree with posts above. the government should clean it up then bill the corporation, then bail the corp out.
 
I think we can agree that with a large degree of certainty that there is no entity (including the government) able to handle something of this magnitude. If the lawyers for said companies involved have a brain in their head (which they do, living in Houston I personally know some oil lawyers that will be involved in this), the portion of the company engaged in this activity is shielded from the rest of the company so liability is not transferred (that's what they pay them for). BP certainly has a shield clause.

That's just business.

So with no deep pockets to sue, who do we bill? And if/when they bankrupt out their liability, who pays for it then?
 
That's part of where our law system needs to be reformed. No company should be allowed to say "I have a billion dollars, but I'm only going to pay for $10 of your costs to fix what we broke."

These companies have manipulated the government into writing laws that favor them. And we've just sat back and continued to vote these same people into office.
 
Bob is right on this one.

But for the problem at hand, I am not sure much can be done about the oil already spilt. All efforts and technology just need to be put towards stopping the leak.
 
[quote name='UncleBob']These companies have manipulated the government into writing laws that favor them. And we've just sat back and continued to vote these same people into office.[/QUOTE]
Virtually all business laws are based on Delaware, not the feds. That whole states rights thing. I don't get a vote in Delaware.
 
set it on fire

company pays all costs for clean up and damages. pays a huge fine after a congressional "grilling" on the safety of oil rigs.
 
Shift the cost of the cleanup to the assets of the company. After that dollar is put towards the debt, push the costs of cleanup either to the industry as a whole (which will be passed on to the consumer), a "temporary" consumption tax on the consumer or increase the bond on any oil rig (present or future) to cover the costs of these cleanups.

Don't worry. We all got this.

And...

http://farm4.static.flickr.com/3276/2910583921_386f246c63.jpg
2910583921_386f246c63.jpg
 
This is precisely how the mining industry works in the US. They create a situation which requires massive cleanup and maintenance, in some cases FOREVER (leaking heavy metals and toxic junk for effectively the rest of time). When it comes time to clean up, they cut the execs big checks, sell off assets to a shell corporation, and declare bankruptcy, leaving the government to cover the costs.

How to deal with this kind of thing after it happens isnt particularly interesting. Its how to prevent it. How the rest of the world does it is heavy unionization of the industry which prevents the kinds of safety violations that often leads to these kinds of things. Secondarily, regulations with teeth (i.e. big government)

Preventing problems is always going to be better than waiting for a problem. Thats the question to ask the libertarian.
 
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Am I the only one who sees the idiocy in cleaning up water pollution by creating air pollution? Isn't that just shifting it around?
 
[quote name='JolietJake']Am I the only one who sees the idiocy in cleaning up water pollution by creating air pollution? Isn't that just shifting it around?[/QUOTE]

Oh, yeah, first you get all pissy because they spilled a few hundred thousand gallons of harmless oil into the ocean and now you don't want them to set a few thousand square miles of the ocean on fire. fucking environmentalists.
 
[quote name='JolietJake']Am I the only one who sees the idiocy in cleaning up water pollution by creating air pollution? Isn't that just shifting it around?[/QUOTE]

Burning it now, or burning it later... does it matter?

Government cleanup, and send the bill to the owner. We just need to spin it into a positive... this will create short term jobs!!!

Has anyone estimated how long it will take to clean?

And I'm surprised we don't do like 1 million roomba pool cleaners and let them "go-at-it". I wonder, they probably can't reuse this oil because of the salt right?
 
[quote name='thrustbucket'] If they could set it on fire I think they would, but I think it is not dense enough to be flammable, or something.[/QUOTE]

http://www.nytimes.com/2010/04/29/us/29spill.html

According to a statement released by the group of industry and government officials supervising the burn, the oil will be consolidated “into a fire resistant boom approximately 500 feet long; this oil will then be towed to a more remote area, where it will be ignited and burned in a controlled manner.”
Click to expand...

derp
 
[quote name='xycury']Burning it now, or burning it later... does it matter?

Government cleanup, and send the bill to the owner. We just need to spin it into a positive... this will create short term jobs!!!

Has anyone estimated how long it will take to clean?

And I'm surprised we don't do like 1 million roomba pool cleaners and let them "go-at-it". I wonder, they probably can't reuse this oil because of the salt right?[/QUOTE]

If your a politician it does. Would you rather be responsible for a giant fire at sea almost nobody will look, or be tied to a giant oil spill that reaches the shore and have picture upon picture, video upon video, story upon story of dead birds, fish, and a oil filled beach with workers all decked out in yellow envirosuits. If the Valdez is any clue, this will probably be burning by tomorrow to stop a political bomb next week.
 
Agree with cinder, it seems like their hands are tied to two choices, burn it or be cleaning ducks and seals with Dawn dish soap.
 
[quote name='Ruined']Where is Beavis when you need him?[/QUOTE]

http://www.youtube.com/watch?v=tpYPXnuBZdg

I'm just checking to see if there are any illegal aliens here.
>Oh, you mean like, Mexicans?

Well, the little bastard devoured my taco burrito combo on the ride over.
>Well, prob'ly Mexican.

Wow. How scarily relevant.
 
[quote name='xycury']Burning it now, or burning it later... does it matter?[/QUOTE]

...kinda?

We're still going to burn it later as well. So, basically, we're burning it twice.
 
[quote name='cindersphere']If your a politician it does. Would you rather be responsible for a giant fire at sea almost nobody will look, or be tied to a giant oil spill that reaches the shore and have picture upon picture, video upon video, story upon story of dead birds, fish, and a oil filled beach with workers all decked out in yellow envirosuits. If the Valdez is any clue, this will probably be burning by tomorrow to stop a political bomb next week.[/QUOTE]

I would guess they are burning it because it would cost far more to clean up. That makes sense. Much less damage in burning it than letting it foul miles of coastline.
 
[quote name='elprincipe']I would guess they are burning it because it would cost far more to clean up. That makes sense. Much less damage in burning it than letting it foul miles of coastline.[/QUOTE]
That and if (or when it does reach the shores) that nice little energy bill Obama is pushing for off shore drilling is going to kill public approval, force the few republicans to abandon the bill and leave the administration with a huge disaster (and more for us to argue about on the board).
 
It's worse than originally thought, quite a bit worse.

http://news.yahoo.com/s/ap/us_louisiana_oil_rig_explosion

"I would say there is little threat to the environment because it won't coat an animal, and because all the volatiles have been consumed if it gets on a shore it can be simply picked up," he said.
Click to expand...
I'm not liking the way that they're ignoring the fact that burning the oil is no more than playing a shell game with the pollution. You're not getting rid of it, just moving it around.
 
So it looks like the spill is significantly worse than first projections. It looks by orders of magnitude worse than anything within the power of a corporation to handle, even the big oils.

So what's the free market response here? Bonus points for working in tort reform.
 
[quote name='speedracer']So it looks like the spill is significantly worse than first projections. It looks by orders of magnitude worse than anything within the power of a corporation to handle, even the big oils.

So what's the free market response here? Bonus points for working in tort reform.[/QUOTE]

Force each oil platform (active and future) to post a bond against the cost of this disaster.

If another disaster happens, collect the bond.

No disaster, no lost money.
 
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[quote name='UncleBob'] Does anyone find it a wee little odd that this happens right after Obama announces an off-shore drilling initiative?[/QUOTE]

It is odd, and he even said it was safe enough to be a good idea. Bill Maher pointed out that if the same events occurred during W, his audience would be in tears laughing at the absurdity of it.
 
[quote name='Msut77']Okaaay...

Part of my question is rhetorical but no seriously how much would it have cost?[/QUOTE]

I'm sure nobody can find the actual price, but let's just say less than the cost of the event but more than the cost of the event times its probability.

...

I've posted some ideas and I'm libertarian, but there has been no feedback.
 
[quote name='fatherofcaitlyn']Force each oil platform (active and future) to post a bond against the cost of this disaster.

If another disaster happens, collect the bond.

No disaster, no lost money.[/QUOTE]
The bond required would have to be based on a worst possible scenario, and that would be mind bogglingly large. If companies had to post a bond for each well, they'd have no money left to drill.

I would argue that you can't have modern capitalism truly cost their externalities because there would be no more capitalism. It's the rare libertarian that's thought that far ahead.
 
In the case of mining, bonds have to sometimes be made for cleanup costs. However in that case, cleanup costs are not a worst case scenario, they are guaranteed to happen. The bond also doesnt scratch the surface of the actual costs, especially when costs are sometimes incurred FOREVER.

In the case of the oil industry, there are solutions that involve both governments and the private corporations. There are some companies now who take extreme care of the land they are given to drill. Its basically a nature reserve that ends up better cared for than the surrounding areas. They allow minimal logging only along the paths they really need. No firearms on the premises (poaching). The reason some companies have started to do this despite great additional overhead expenses are that they are more likely to get contracts in Europe and Asia where the governments (or tribes in the case where no significant government is present) have become very environmentally conscious. Its not a complete solution in that the market conditions still allow for most companies to do things the old way.

In this particular case, it would seem that underwater oil drilling poses an environmental disaster risk in the worst case scenario that is significantly worse than on land drilling. If externalities are really so far above and beyond what can be paid for, then underwater oil drilling must be banned. So its back to big government.
 
[quote name='speedracer']The bond required would have to be based on a worst possible scenario, and that would be mind bogglingly large. If companies had to post a bond for each well, they'd have no money left to drill.

I would argue that you can't have modern capitalism truly cost their externalities because there would be no more capitalism. It's the rare libertarian that's thought that far ahead.[/QUOTE]

Regulatory capture is so complete and so utterly ingrained in this country that the big interests hardly even pretend to care anymore.

http://www.whistleblower.org/blog/3...tails-emerge-about-bps-oil-platform-explosion
 
[quote name='speedracer']The bond required would have to be based on a worst possible scenario, and that would be mind bogglingly large. If companies had to post a bond for each well, they'd have no money left to drill.

I would argue that you can't have modern capitalism truly cost their externalities because there would be no more capitalism. It's the rare libertarian that's thought that far ahead.[/QUOTE]

http://www.boisestate.edu/history/ncasner/hy210/valdez.htm

http://www.wtrg.com/rotaryrigs.html

Let's pretend the worst case scenario is $2 billion.

For a round number, let's say there are 50 offshore rigs. The second link says 47 last year.

So, we're talking about $100 billion.

http://www.bp.com/extendedgenericarticle.do?categoryId=2012968&contentId=7056996

BP alone made over $10 billion in 9 months. Let's pretend BP is the only game in the world. So, they would give up profits for 8 years, right?

http://science.howstuffworks.com/us-gas-addiction.htm

Well, they would pass it onto the consumer anyways.

If the rigs had to be paid for by next year, we're talking an increase in the price of gas by $13 per gallon for one year.

However, how many offshore oil rigs have suffered this fate in 20 years?

Take that $13/gallon and divide it by 20 years. You have a permanent 65 cent bump in the price of gasoline.

I don't think that would shut down the industry.
 
Hearing about your proposal increasing the cost of gasoline has me for it regardless of other considerations.

Having to pay anything remotely resembling the actual cost of gasoline would destroy conservatism in America by threatening areas of low population density that only exist now because of massive subsidies of all sorts.
 
[quote name='Dr Mario Kart']Hearing about your proposal increasing the cost of gasoline has me for it regardless of other considerations.

Having to pay anything remotely resembling the actual cost of gasoline would destroy conservatism in America by threatening areas of low population density that only exist now because of massive subsidies of all sorts.[/QUOTE]

http://www.infrastructurist.com/2010/04/26/how-much-gas-does-your-state-use-per-person/

The Southern States are like a bloc of gas guzzlers, they are addicted (ok especially addicted) to cheap gas and hence why they are so susceptible to the drill here rhetoric.

FoC: I heard numbers as low as half a million dollars per rig for those remote sensors, I don't know how accurate it is.
 
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[quote name='fatherofcaitlyn']Let's pretend the worst case scenario is $2 billion.[/quote]
BP has set aside $10 billion for its portion of expected liabilities. I think they're in for like 65% or 75% of the well. That would put it closer to $13.5 billion, plus the oil service providers and their liability, like Halliburton's now questionable cementing job. I think when all said and done, something on the order of $15 bil per would capture most of the reasonably projectable worst case scenario cost.

That would bump the price of gas like $5 extra?
 
Apparently the cost of those remote shut off valves really were in the neighborhood of 500k per rig, which is a lot to you or me but probably less than any particular Oil Company Exec. spends on mistresses a year.
 
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