BP Cost Cuts Cited in Blast at Texas Plant

A recent report has found that the accident that occurred in Texas, at a BP PLC refinery, happened because of poor plant conditions and poor safety records due to cost cutting and budgetary constraints. According to a report done by the U.S. Chemical Safety and Hazard Investigation Board, “BP executives failed to heed years of warnings about serious deficiencies at the company's Texas City refinery, including an internal assessment that budget constraints had jeopardized the plant's safety.” The CSB discovered that these budget cuts impaired safety practices at BP’s plant. They have also criticized BP for not providing an “adequate amount of resources to prevent major accidents.”

The accident was the result of an explosion at a gasoline-processing unit on March 23, 2005, killing 15 workers and injuring 180. "Managers received warnings about serious deficiencies regarding the mechanical integrity of aging equipment, process safety, and the negative safety impact of budget cuts and production pressures," the report found. BP has taken responsibility for the blast, agreeing that the plant was in poor condition and had poor safety and management practices.

After accidents such as the one that occurred at the BP PLC refinery plant, do workers in those industries think about asking for a higher wage because of the inherent danger in their field? If they don’t possess perfect information or underestimate their potential risks, they are probably underpaid. The marginal benefit curve for safety will increase after such an accident, causing wages to increase. When workers possess perfect information, such as the conditions of the plant or lackadaisical safety procedures, the wage they accept is socially optimal. If they don’t have this information then they should be paid more because that isn’t the socially optimal wage.