Market Failures

Market Failures

January 6, 2015|Posted in: Uncategorized

The Gulf of Mexico oil spill drew much attention concerning possible market failures which led to both the British Petroleum and the US government on the spot. The market failures resulted heavily from the breach of oil drilling protocol and requirements that had been outlined to regulate the sector. Firstly, the BP Company, in the aftermath of the disaster, failed to take full responsibility and take corrective measures to the affected including the environment as well as the society. Firstly, the company, in its failure to recognize the ocean ecosystem pollution that ensued, claimed that the Gulf of Mexico Ocean was a huge mass of water in reference to what the spill amounted to. This was a bid to heave the company duck the responsibility and make the spill seem harmless to the oceanic ecosystem (Webb, 2010).

In addition to this, the company also failed to take responsibility and ill-advised the public concerning its response to the spill. The assessment team of the company asserted that the spill containment team allied to it had successfully done all containment efforts and that the spill was under manageable conditions. Concurrently, the independent assessment of other experts revealed that there were leaks still emanating from the damaged wells. This was a comparatively serious level of negligence, irresponsibility and failure (Webb, 2010).

Secondly, in a breach of the regulations laid in place, the BP oil company had tussles with the compensatory mechanisms that had been laid in cases of accidents concerning the oil drilling sector. The gulf oil spill left the environment heavily polluted; affecting the oceanic habitat as well as affecting the surrounding community’s main source of food and living. The response to the need to compensate the individuals mainly affected by the spillage was a considerable measure of market failure. The company’s compensation did not uniformly meet the expectations of the law as was expected. Many of the people who received compensation for the damages caused by the spillage were not satisfied as the company did not take into consideration all the factors that the market demanded; the intensity of the spillage, duration of the spillage and the level of the impacts of the spillage to the livelihoods of the surrounding communities. The payouts made by the company were also not proportional to the intensity of the damages and effects caused by the spillage (Kelly, 2014).

In responses to these failures, the government ought to have made several efforts which would have included suing the company for the negligence of protocol, something that would have ensured that the prospect of impunity was eliminated while granting justice to the ill-affected people. In response to the crisis that ensued after the company failed to meet the compensatory obligation, the government ought to have laid stiffer regulatory mechanisms to ensure that similar instances did not occur. Such measures as laying stiffer compensatory mechanisms, policies and regulation would have served to make company meet the expectations.