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Total oil spill costs and compensations

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  • Xin Liu
  • Kai W. Wirtz

Abstract

Although counteracting environmental programmes and policies have been strengthened, large oil spills still occur at irregular intervals. The total oil spill costs and their compensations have attracted much interest from various parties, such as local stakeholders, and state and federal governments. This paper addresses five major cost categories whose aggregations are expected to cover the overall direct and indirect costs after the release of an oil spill. Among them, research costs should not be neglected, since they tend to be high if public attention has been drawn to the case. Through an examination of the relationship between the total oil spill costs and their admissible claims, we found that: 1. admissible claims do not cover the overall costs of the oil spill, and 2. admissible claims cannot be compensated in full in the case of large spills. Clearly, a sound oil spill contingency management aims to minimize both the environmental impacts of areas most at risk and the total oil spill costs. In this paper an economic model for measuring environmental damages following an oil spill is addressed and applied to the Prestige case which happened to be the worst oil pollution in the history of Spain. The model indicates how an ideally a priori economic evaluation may intuitively help managers to make informed as well as fast decisions in contingency cases.

Suggested Citation

  • Xin Liu & Kai W. Wirtz, 2006. "Total oil spill costs and compensations," Maritime Policy & Management, Taylor & Francis Journals, vol. 33(1), pages 49-60, February.
    • Handle: RePEc:taf:marpmg:v:33:y:2006:i:1:p:49-60
    DOI: 10.1080/03088830500513352
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    References listed on IDEAS

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    1. Dunford, Richard W. & Ginn, Thomas C. & Desvousges, William H., 2004. "The use of habitat equivalency analysis in natural resource damage assessments," Ecological Economics, Elsevier, vol. 48(1), pages 49-70, January.
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    2. Knapp, S. & Heij, C., 2016. "Evaluation of total risk exposure and insurance premiums in the maritime industry," Econometric Institute Research Papers EI-1661, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Vanem, Erik & Endresen, Øyvind & Skjong, Rolf, 2008. "Cost-effectiveness criteria for marine oil spill preventive measures," Reliability Engineering and System Safety, Elsevier, vol. 93(9), pages 1354-1368.
    4. Wirtz, Kai W. & Baumberger, Nick & Adam, Susanne & Liu, Xin, 2007. "Oil spill impact minimization under uncertainty: Evaluating contingency simulations of the Prestige accident," Ecological Economics, Elsevier, vol. 61(2-3), pages 417-428, March.
    5. Di Vaio, Assunta & Varriale, Luisa & Trujillo, Lourdes, 2019. "Management Control Systems in port waste management: Evidence from Italy," Utilities Policy, Elsevier, vol. 56(C), pages 127-135.
    6. Assunta Di Vaio & Luisa Varriale, 2018. "Management Innovation for Environmental Sustainability in Seaports: Managerial Accounting Instruments and Training for Competitive Green Ports beyond the Regulations," Sustainability, MDPI, vol. 10(3), pages 1-35, March.
    7. Wenshuai Wu & Yi Peng, 2016. "Extension of grey relational analysis for facilitating group consensus to oil spill emergency management," Annals of Operations Research, Springer, vol. 238(1), pages 615-635, March.
    8. Wenshuai Wu & Yi Peng, 2016. "Extension of grey relational analysis for facilitating group consensus to oil spill emergency management," Annals of Operations Research, Springer, vol. 238(1), pages 615-635, March.

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