cost benefit analysis of offshore drilling by colson myers

COST BENEFIT

ANALY

SIS

OF OFF

SHORE DRILL

ING

BY

CO

L SO

N M

YE

RS

OIL IN THE ECONOMY

• In 2010, nearly $476 billion were contributed to the U.S. economy from the oil and natural gas industry.

• In 2011, close to 32 billion barrels of oil or natural gas were used worldwide.

--around 89 million barrels a day.

OFFSHORE DRILLING

• By 2018, the offshore drilling industry is projected to be worth $121.1 billion.

• Last year, there were 821 functional offshore oil rigs in the world.

• Offshore drilling in the Gulf of Mexico accounts for around 17% of total U.S. crude oil production.

TOP OIL PRODUCING COMPANIES

1. Saudi Aramco

2. Gazprom

3. National Iranian Oil Co.

4. ExxonMobil

5. PetroChina

6. BP

7. Royal Dutch Shell

8. Pemex

9. Chevron

10.Kuwait Petroleum

EXXON VALDEZ

• March 23, 1989

• Spilled over 11 million gallons of oil

• Contaminated around 1300 miles of Alaskan shoreline

• Total cost of spill around $7 billion

--cleanup alone was just $2.5 billion

EXXON’S PROFIT/COST OF THE SPILL

• In 1989, Exxon made a $3.8 billion profit and a $5 billion profit the next year.

• A 2008 Supreme Court ruling required Exxon to only pay $507.5 million.

--As of 2009 they have only paid $383 million.

EFFECT’S OF THE EXXON SPILL

• As of 2009, 16,000 gallons of oil still remain.

• In 2001, almost 20 acres of shoreline were still contaminated

• Only 8% of oil was actually recovered from the spill.

COST BENEFIT ANALYSIS OF SPILL

Cost of the spill93%

Amount paid by Exxon

7%

Cost of the spill compared to Exxons

compensation

Profits of Exxon in 1989

Compensation for the 1989 spill

0 2 4

Amount in Billions of dollars

BP EVENT HORIZON SPILL

• Happened April 20, 2010.

• 11 people were killed

• 210 million gallons of oil

• 16000 miles of coastline affected

COST OF CLEAN UP AND FINES

• Under the Clean Water Act

--$1100 per barrel

• This was raised to $4600 due to negligence

• This amounted to $16 billion on top of the $40 billion BP owed for clean up and settlements.

BP LOSS AND FINES SO FAR

• Set aside $43 billion for spill

• BP has paid around $32 billion so far

• Still owed the government $4.5 billion over the years 2010-2015.

BP PROFIT (SPILL TILL NOW)

2010 2011 2012 2013

-5

0

5

10

15

20

-2.41

16.03

6.95

15

Profit in $billions

EFFECT OF THE BP SPILL

• Left oil spill on the gulf seafloor

• After six months, over 8000 marine animals were found injured or dead.

LONG TERM EFFECTS OF THE SPILLS

• Decreased Fish and Wildlife Populations

• Decline in Recreation

• Unbalanced Food Web.

VISUAL COMPARISON OF THE TWO SPILLS

COMPARISON OF THE TWO SPILLS

• Exxon ended up being responsible for around $46.14 per gallon spilled.

• BP ended up being responsible for around $266.67 per gallon spilled.

REFERENCES

• http://www.energytomorrow.org/

• http://www.iea.org/

• http://www.noia.org/

• http://www.ihs.com/index.aspx

• http://www.eia.gov/

• http://www.forbes.com/fdc/welcome_mjx.shtml

• https://www.americanprogress.org/

• www.cnn.com

• http://www.education.noaa.gov/

• http://oceana.org/en

• http://www.marketwatch.com/investing/stock/bp/financials