General Question

Steve_A's avatar

Is it the true the cap for BP to pay is 75 million dollars?

Asked by Steve_A (5120points) June 12th, 2010

I heard that they (I’m not even sure who they are, the government?) Is suppose to raise the cap to 2 billion or more?

Is this correct or it will it be only 75 million?

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25 Answers

john65pennington's avatar

To my knowledge, the law enacted by Congress with the Valdez oil spill, did not set a limit on restitution by the offender. last year, BP profited almost 100 billion dollars. to BP, the oil spill is just a “drop in the bucket” as far as the oil spill is concerned.

janbb's avatar

Yes, I believe the cap for ancillary liability is $75 million. Congress is trying to raise it for BP; there’s been talk about 10 billion but Pelosi thinks that’s too low.

Steve_A's avatar

@john65pennington You mean there was nothing before?

Steve_A's avatar

@janbb Hm well, the thing I have also heard is that if “we” decide to make them pay more they will just compensate for it by jacking up their prices which effects us in the end.

Would it do more bad than good?

Not saying they should not pay anything but….I don’t really know what do you think?

laureth's avatar

@Steve_A – Let’s say they pay for all the damages that they caused and make everything right with the fishermen and the environment. (This is theoretical.) Let’s say it’s somehow not enough of a loss, either, to have to liquidate the company to pay for it. So they jack prices up the wazoo, and the price of all things BP goes sky high. And people fail to support them, paying instead the reasonable prices charged by companies that don’t fail at safety and don’t have to pay that kind of penalty. This is the free market at work.

Even economist Milton Friedman said that making a company completely liable for the damage it causes is necessary to the workings of a free market. When people (generally the Right) want things like “tort reform” and caps on damages, these people (who generally pay lip service to the free market being the answer to all problems) actually prevent a free market from existing.

So, what it comes down to, is that clearly someone is going to get screwed here. Should it be the fishermen with no livelihoods, the gulf ecosystem, and future generations et al., or should it be the company that caused the mess? I, for one, vote for the company to take responsibility for the full extent of what it has done. Any other answer causes privatization of profits and socialization of the costs of business.

Steve_A's avatar

@laureth Basically putting a cap on it in anyway or amount is bad?And BP should pay whatever the amount they are responsible for?

Who decides that?

laureth's avatar

That’s what we have courts and judges for! ;)

Steve_A's avatar

@laureth So all this depends on what one judge deicdes…

laureth's avatar

…and the appeals court, and possibly the Supreme Court…

This is what happened when the Exxon Valdez spilled oil in Alaska. The appeals court and SCOTUS kept cutting down the original judgement.

So, in short, it’s very unlikely to come down to one judge.

Steve_A's avatar

@laureth Reading that articale was disappointing not towards you I mean I found it helpful….I mean the article itself…...20 years?

laureth's avatar

That’s what happens. :)

Besides, even if BP does jack up prices, what they sell is a commodity. They can’t really charge too much more than the other gas stations on the corner, y’know? Because even when one gas station charges a penny more, they lose business to the one that charges a penny less. (Without looking into all their documentation, I believe everything they sell is a commodity like that.) So the only place they could really recoup a loss like that would be to cut within the organization – like safety stuff – which is apparently what they’ve been doing to get into this mess.

Oh! To answer the original question about the cap – yes, it is $75M, but it’s up for a decision. We don’t really know yet. And apparently, Pelosi favors a free market. ;)

Steve_A's avatar

@laureth I kinda have more questions but I’m not sure if I’d be annoying you at this point hah :)

Thanks for the helpful answers, insightful.

jaytkay's avatar

The 1990 Oil Protection Act caps damage payments to private parties at $75 million.

How Much Will BP Have to Pay? Damage Caps for Big Oil
and Why BP May Pay More Than $75 Million

laureth's avatar

@Steve_A – can’t hurt to ask. If I don’t know and can’t find the answer, I’ll just say so. Maybe someone else here will know, too. Fluther is full of people with answers.

Seaofclouds's avatar

I remember reading one story where BP said that they were willing to pay over the cap to take care of the spill.

The thing to remember about BP raising prices is that it will cause other gas prices to go up as well. BP gas is not only sold to BP gas stations. They also sell to other gas stations near their refinery. So, if they raise their price to those other gas stations, those gas stations either pay more to get the gas and then have to charge us more to make up the difference or they try to get the gas from somewhere else. If they aren’t able to make a deal with another refinery, they would have to charge more. That is why strictly boycotting BP gas stations would not lead to a boycott of BP in general.

Once they raise their prices, the other companies will as well to have an excuse to make more money. Yes, people are going to try to go to the cheapest place, but why would the cheapest place keep their prices significantly lower when they can raise them as well, just not as high as BP, and make some more profit? I’m not saying I agree with it, just that it’s how the oil companies work.

jaytkay's avatar

For perspective, BP’s first quarter 2010 profits were $5.6 billion US.

They made $75 million every 29 hours.

laureth's avatar

@Seaofclouds is right, and that’s part of the downside of a free market; however, isn’t this a great time to try to disincentivize fossil fuel use anyway? I know people like the “unalterable American way of life and consumption” and all, but it’s really not too sustainable as-is. Higher prices would make people buy less (theoretically, until they went back down, like they did in response to the downturn). Gas is cheaper in America anyway, partially because a lot of the cost of business is so socialized.

lilikoi's avatar

@laureth Well said. That is exactly what I was thinking as I was reading down the post.

ETpro's avatar

@Seaofclouds Oil is a commodity and even the OPEC states have had minimal ability to control its price to suit their whim. There are too many suppliers willing to undercut one party unilaterally raising their price. BP is the 6th largest oil company. None of the Western oil giants, including the world’s largest company, Royal Dutch Shall, equal the output of OPEC. In fact 14 of the top 20 oil producers are National Oil companies or partially privatized but nationally held. BP, at #6 among publicly held companies, has no more ability to control the price of oil independently than McDonald’s does the price of fast food. If Big Macs suddenly went up to $8 a piece, that would just be good news for Burger King and Wendy’s.

While BP is #5 in size among US operators, they are Numero Uno when it comes to serious US safety violations. In the last 4 years, BP racked up 760 egregious, willful safety violations (the worst category) while 2nd place Sunoco and ConocoPhillips both had 8, Citgo had 2 and the world’s l;largest oil company, Exxon-Mobil had just 1. Make them pay the full extent of the damages.

So far, Senate Republicans have blocked even bringing the $75 million liability cap up for a vote. The American people have to put the pressure on them. This is no time for more corporate welfare forcing the American taxpayer to have to step in and socialize risk while privatizing profits yet again.

Seaofclouds's avatar

@ETpro I agree that they should pay the full extent. I was just commenting that I had read that they were willing to pay above the cap that is currently in place. I haven’t heard anything that has them saying they didn’t want to pay for the full extent at this point.

As far as the pricing, I will admit that I don’t know how the actual price for oil is determined. What I was saying was that if BP raises prices, the others will as well to some degree. If your competitor is selling the same thing as you for a higher price than you, you can raise your price some, but still remain lower than your competitor, and thus increase your profit. It sucks for us, but I can see greedy corporate people not caring what sucks for us and just worrying about what will line their pockets with the most money.

ETpro's avatar

@Seaofclouds I have listened to Tony Hayworth’s words, but his actions speak louder. BP has been doing things that actually make the environmental damage far worse, but that make it harder to tell how much oil has spilled. I can only conclude that is because fines for the direct spill are set based on the number of barrels spilled. They have lied outright, run a massive disinformation program, and spent valuable resources on public relations and cover ups while letting simple things they could do to contain and clean up the oil go undone. I have absolutely zero faith in Hayworth doing anything but trying to minimize the financial damage to BP, because actions speak way louder than words.

Regarding prices, they are set on the international commodities market and are roughly based on supply versus demand. Of course, human emotions play a role as well, just as in other big markets. But it is completely wrong to say that one entity raising their price takes everyone else up with them. If that worked, Iran would raise the price to $500 a barrel and bankrupt the West overnight.

Seaofclouds's avatar

@ETpro Is there proof that they lied about how much has been spilled? I know that there have been a lot of questions about how much has been spilled, but I thought it was just that people were making estimates and realizing that their estimates were wrong. I don’t think being wrong is the same thing as lying, so I’m just curious if they have really been lying or if it’s just that they had been wrong? I don’t watch the news, only read up on particular issues when something catches my eye, so I could have easily missed things about the oil spill.

ETpro's avatar

@Seaofclouds Their own internal estimates initially were 1,000 to 14,000 barrels a day. They went with the low end instead of a reasonable middle range or just announcing what they knew. They further suppressed the live video images till they were backed into a corner by our government and forced to make them public. Once the images started being reviewed by independent scientists, estimates as high as 40,000 to 100,000 barrels began to float around. After a time of that, BP it was 5,000.

They stuck with that even after finally getting the “straw” inserted and claiming they were capturing 5,000 barrels a day with it. When commentators jumped on that obvious inconsistency—oil was clearly still spewing out in the live videos, they couldn’t be capturing it all—they then said Oops, we meant we were capturing 1,000 barrels a day. How many barrels a day theywere capturing isn’t guesswork. It is flowing into a tanker with a gauge in the tanks. They knew exactly what they were capturing, but caught themselves in their chain of lies.

It now appears that 40,000 to 100,000 barrels a day is closer to the truth, but it has taken nearly 2 months to get at that. BP told the world that capping the leak was “more important” than estimating the flow. That’s baloney. As an engineer, I know very well you can’t design a cap for something like that leak without knowing how big a leak it is. And measuring the leak volume, even at 5,000 feet depth, is not rocket science. You simply need to measure the size of the hole, the pressure and speed of flow. It’s a straightforward calculation given that. I can guarantee you BP knows exactly what the flow rate is, they have just been lying about it, and they continue to lie.

Seaofclouds's avatar

@ETpro Ahh, I see, thanks for sharing. I didn’t know any of that (especially the stuff about calculating the flow). Good stuff to know! :)

mammal's avatar

BP will pay x amount and no more, that is the likeliest scenario.

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