Just over five years ago, eleven rig workers died off the coast of Louisiana in a BP-owned oil rig explosion. While the disaster rightly grabbed headlines, what often doesn’t get much attention are the hundreds of lives lost each year to similar accidents in developing countries where there have been about 7.4 times more accidents over roughly the last 30 years, according to a study coming out in December by University of Chicago and Paul Scherrer Institute (PSI) researchers. The researchers used trade data to assign every fatality that had occurred during oil production and import activities (taken from PSI’s Energy Related Severe Accident Database) to a barrel of oil between 1978 and 2008. They found that developing countries sustained more than 19,000 deaths, while developed countries sustained just over 2,500.

“While OECD [Organization for Economic Cooperation and Development] countries consume the majority of oil produced annually, most of the accidents occur in non-OECD countries,” says Rebecca Lordan, one of the authors of the study and a PhD student at the Harris School of Public Policy. “The first important step to changing that is reassigning responsibility.”

As it works now, some countries impose strict regulations on energy companies to ensure they are responsible for accidents that may occur. For example, the US requires that operators prepare disaster contingency plans and when there is an accident the owners of the vessel or facility are held liable. However, many less developed countries, such as Nigeria or former Soviet Union countries, lack the regulations or capacity to enforce regulations that would appropriately incentivize firms to take precautions against accidents or to fund recovery following an accident. Or they lack needed technology or infrastructure to prevent such accidents. As a result, many developing countries bear a much greater burden from oil production and transportation than the developed countries that consume most of that oil.

“We do not believe it is acceptable for developed nations to capitalize on developing countries with less capacity to enforce environmental protections or safety measures,” says Lordan, who notes that the worst practices seem to be located where the resources exist, where the regulations are relaxed, and occur during transportation where blame cannot easily be assigned.

Lordan and her coauthors believe it would be ineffective to correct this inequity at the national level because the countries don’t have the capacity to enforce the regulations. Assigning responsibility to the energy companies would also be difficult because pinpointing who is in charge or who owned the material at a given time is near impossible, especially while in transit – when many of the fatalities occur. Instead, the authors believe a trade policy that includes the fatalities might force nations and companies to improve their standards so as not to lose revenue.

Without improved trade policies that would shift the responsibility for fatalities on oil consuming countries, and therefore lessen the amount of fatalities, the authors say there are three main levers to reduce the impacts of accidents related to oil trade and production: increase safety standards and regulations; reduce the distance of oil trade to reduce risk exposure, or simply reduce the amount of oil trade.

The study was supported in part by the Energy Policy Institute at the University of Chicago (EPIC). It will appear in the December issue of the Journal of Cleaner Production.

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Definition
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.