Listening to the news, you might have thought that BP was picking up the tab for this oil spill, but that's only true in a very limited sense. Brad Plumer explains:
Big, wealthy oil companies like BP are usually expected to pay to the cleanup costs themselves. But that still leaves the cost of all the indirect damage to fisheries and wildlife habitats in the area. In that case, under current law, an offshore rig operator is liable for up to $75 million in damages. After that, the federal government picks up the tab, using an oil spill liability trust fund that's paid for by a tiny tax on oil (amounting to one-tenth of 1 percent of the price).So BP chips in $75 million. And this trust fund can kick in another $1 billion. But the estimated economic cost of this disaster (when you include damages to fisheries, lost tax revenue, and the like) is somewhere between $10 billion (in the best-case scenario) and infinity. We, the taxpayers, are going to be paying for the difference through lots of new deficit spending. One way to fix this situation: Raise the cap on the oil company's liability so that a catastrophe like this bankrupts them instead of us.
Image: 100421-G-XXXXL-_003_-_Deepwater_Horizon_fire, a Creative Commons Attribution Share-Alike (2.0) image from uscgd8's photostream