Ask the Expert: Sima J. Gandhi on Big Oil Subsidies

How much responsibility can we expect oil companies to take when they cause major disasters?

Well, right now oil companies aren't taking very much responsibility in the grand scheme of things because they benefit from government subsidies even though they're highly profitable. But their actions have the ability to inflict great damages upon society. Right now, BP, which is the oil company responsible for the Deepwater Horizon disaster, is paying for the cost of its cleanup. But there are other costs that are associated with this. State and local governments will incur costs, the federal government right now with the Coast Guard and EPA are incurring costs for cleanup as well as future costs for natural resource rehabilitation. Louisiana fishermen right now are going to incur business losses because they can't fish. The Florida tourism industry will incur losses because if oil washes up onto the beaches it will hurt the tourism industry. Real people will suffer, and real businesses will suffer losses, and BP isn't necessarily on the hook for that. They're capped under federal law at $75 million, which means that any costs suffered by people beyond that amount will come from taxpayers.

Why do we provide them with such large tax subsidies?

Tax subsidies are a problematic form of government spending because they're hidden, they're a hidden form of government spending. They're not integrated into the congressional budget process, they're complicated, people don't really understand why they're there. And so the initial reaction is to defer and keep them there because oil companies and other types of companies that have powerful lobbyists can make the case for these tax subsidies even though oftentimes they just line the pockets of big companies and rich folks for doing things that they'd be doing anyway. For example, oil companies right now get a tax subsidy for drilling for oil. That's something that they are clearly going to do. These subsidies over 10 years will amount to at least $45 billion.

How can we hold oil companies more accountable?

I think the first thing that Congress should do is increase the liability cap on oil companies. It's time for them to start realizing that the costs that their actions incur on society have costs that need to be paid for. And they're highly profitable and should be bearing the burden of that cost. The second thing Congress needs to do is start eliminating tax subsidies and other types of government subsidies for oil companies. This is a very highligh profitable industry. It doesn't need government subsidies. The president proposed nine tax expenditures, which, if eliminated, would save the government $45 billion over the next 10 years. That's a lot of money that could go toward more productive uses—for example, transitioning our country toward a clean energy economy, which is something other countires like China and Germany are taking the lead on. America needs to maintain its competitive edge. So, oil companies, which are highly profitable and incur costs to society at large, should not be getting government subsidies.