Who cleans up the oil? A microeconomic study

Abstract

Although oil spill cleanup requirements have existed in the United States for years, recent increases in oil imports and marine transportation of petroleum products as well as growing environmental concern have exposed a new industry, the Oil Spill Cleanup Industry. This paper explores some of the microeconomic aspects of this industry which has come under increased scrutiny by the general public, big business, and the federal government. In addition to a brief history and definition, several basic questions about the economic viability of the oil spill cleanup industry are raised and explored, and the impact on the industry of cleanup from government sources is examined, both from the perspective of present operations and from apparent future increases in federal participation. The primary dilemma facing the industry, that of providing continued and immediate supply while confronted with stochastic demand, is discussed. The effects of the large spill on the industry both in terms of revenue and ability to meet cleanup requirements is also considered. Information for the paper is drawn from past and continuing involvement in the U.S. Coast Guard's Marine Environmental Protection Program by both authors. The statistical evidence presented here was compiled through personal interviews and from two computerized Coast Guard information systems; PIRS (the Pollution Incident Reporting System), and SKIM (the Spill Cleanup Equipment Inventory System).