The mention of an oil spill conjures up images of inky oceans, beaches stained black and workers in protective gear wading down the coastline, rescuing animals caked in oil. They are indisputably terrible for the environment.
However, in 2021 — even as the United States suffers over 100 oil spills per year — the largest oil and gas companies, including BP, Exxon and Chevron, made a combined net profit of $174 billion.
To understand how much oil spills cost companies and affect their profit margins, we’ll need to take a closer look at some of the country’s most significant ones from the largest companies.
What Are Oil Spills?
Oil spills occur when liquid petroleum is released into the environment, either by human error or natural disasters. Ships can sink, hurricanes can strike, pipelines can burst and any number of other things can go wrong.
Oil isn’t the only resource lost in these spills. Freshwater is used in the oil industry for everything from drilling wells to producing electricity, and the supply is often lost or contaminated during a spill. They are also deadly to unsuspecting wildlife — birds’ feathers become covered in oil, dolphins and whales get poisoned from toxic fumes, and desert animals get stuck in rivers of scalding oil.
The Price of Major Oil Spills
In 2020 alone, 43,157 barrels of oil were spilled just from pipelines in the United States. To cover every oil spill in just the last year would fill up the rest of this article. However, some of the most publicized oil spills offer the best look into the cost of these events for major companies.
Oil Spills at Sea
One of the worst U.S. oil spills occurred in 1989. The Exxon Valdez tanker struck a reef and spilled 11 million gallons of oil into Prince William Sound in Alaska.
The cleanup costs were about $2.5 billion, with another $5 billion in damages ordered to be paid to affected fishermen and small businesses. However, after years of court appeals, Exxon reduced the amount owed in damages down to $500 million. Exxon’s 1989 annual profit was still $3.8 billion in the wake of all these renegotiated fines and fees, and it rose to $5 billion in 1990.
The Exxon Valdez incident was the largest U.S. oil spill until 2010, when BP’s Deepwater Horizon oil rig suffered a massive explosion. For 87 days, a staggering 134 million gallons of oil poured into the Gulf of Mexico.
BP spent over $14 billion in cleanup and response. Combined with fines, penalties, settlements and more, BP lost over $60 billion to the oil spill and is still paying today. While it seems Exxon was able to greatly reduce the financial damages of its 1989 spill, BP is still reeling from its 2010 penalties.
Oil Spills on Land
Though less publicized, land spills still result in millions of gallons of oil flooding the environment.
Chevron has faced its share of criticism for profiting from oil spills in California. In May 2019, it collected over 1.2 million gallons of oil and wastewater throughout the four months following a large spill. Chevron was condemned by the governor and ordered to pay a $2.7 million fine, but instead, it sold the oil at profit and avoided paying the penalty.
Another California site, also operated by Chevron, has been flowing since 2003, spilling over 16.8 million gallons of oil. This site, called GS-5, has produced $11.6 million worth of oil since 2017 alone, though Chevron says it has been trying to contain the spill since it occurred.
Whether these spills were intentional, the result of incompetence or just terrible accidents, it is clear that Chevron has been able to turn these spills into profit.
Profiting Off Oil Spills?
After high-profile oil spills like these, the public often accuses oil companies of causing and then profiting from them. After all, oil spills devastate the environment, killing countless animals and sometimes humans as well — yet even as these devastating spills occur, companies still profit and evade fines.
Furthermore, companies can also write off settlement charges on their taxes, which is the route BP took, greatly reducing the appropriately harsh financial penalties.
While companies may transform these ecological disasters into opportunities for profit, oil spills don’t often result in a windfall for the responsible party. They suffer financial and reputational damages no matter how much profit they can scrape out of the spilled oil.
The unfortunate truth is that as long as oil is required, even the strictest safety measures and most moral companies may not be enough to prevent another spill.