A recent poll reflected that in the aftermath of the BP disaster only 25% of Americans say they would support off-shore drilling. And even before the facts are known about the causes of the disaster, U.S. leaders have called for criminal sanctions against the oil company.
But in seeking to punish BP, even in advance of any evidence of criminal wrongdoing, we should be careful what we wish for.
Many consumers tend to look at large oil companies as some kind of massive, independent, even alien entity which can be plucked like a golden goose.
In fact, however, the owners of these companies are primarily small investors, mutual and pension funds, particularly labor union pension funds. While it is true that the large oil companies earn about 15-20 cents on each gallon of gas they sell, only a miniscule percentage of those profits go to oil executives, with the lion’s share going to investors, pension and labor funds.
Indeed big oil’s profit return of 8.3% is far behind the profit margins of many other industries such as beverages (19.1%).
No wonder then that the headline of the June 9, 2010 edition of Britain’s Daily Mail blared: “Obama’s Boot on the Throat of British Pensioners.” Nor is the 50 percent decline in BP’s capital borne only by British pensioners; small investors and labor unions in the U.S. are also suffering massive losses.
If American consumers truly believe that oil company’s anemic 8.3% profits are “obscene”, they can become oil company owners themselves by the simple expedient of buying oil company stock.
So why don’t they? When pressed, most who decline to buy oil company stock cite the massive risks of such an investment. Investors in oil companies in the early 90s lost their shirts, and disasters such as those in the Gulf can reduce an oil investor’s nest egg by half in a matter of days.
Although pensioners, particularly the elderly, are most likely to feel the pinch of catastrophic losses incurred by oil companies, consumers, too, will suffer when threats of criminal sanctions are followed by demagogic demands to shut down off-shore drilling.
The reason that companies like BP ventured out into the dangerous deep waters of the Gulf to find oil is that environmentalists “succeeded” in banning oil drilling in much safer shallow waters off coasts.
And yet one wonders if the people whose political and demagogic pressure pushed companies into dangerous deep waters will be the first to squawk when gas prices rise to $10 a gallon (as they already have in England and much of mainland Europe) because of restrictions on production.
Indeed, one wonders what the 75% who oppose drilling will say when they find that it costs over $200-$250 to fill up their SUV’s—which is why you don’t find too many SUV’s in Europe.
And if gas taxes are permitted to rise even further (in the form of the euphemistically labeled “cap-and-trade” taxes), consumers in the coming years may look back at $10 gallon gas as nostalgically as we look back at 10 cents a gallon gas sixty years ago.
BP will face massive legal liability for its oil spill in the Gulf—as it should for the damage it causes, and regardless of fault. That’s the price of doing business in the super risky business of satisfying American consumers’ ravenous addiction to oil and SUVs.
Premature attempts to impose criminal liability in an effort to as the British describe it, deliberately and maliciously “ruin small pensioners” by premature threats of criminal action cannot serve as a substitute for decisive government leadership, action, and cooperation with the oil companies themselves to stop the Gulf spill and minimize the environmental damage.But
Robert Hardaway is Professor of Law at the University of Denver Sturm College of Law and the author of “Population, Law, and the Environment” (Praeger Press).
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Robert Hardaway is Professor of Law at the University of Denver Sturm College of Law, author of "The Great American Housing Bubble" (ABC-CLIO, 2011), and eighteen other books on law and public policy.