An Expected Consequence Approach to Route Choice in the Maritime Transportation of Crude Oil

Authors

  • Atiq Siddiqui,

    Corresponding author
    1. Faculty of Business Administration, Memorial University of Newfoundland, Canada
    • Address correspondence to Atiq Siddiqui, Faculty of Business Administration, Memorial University of Newfoundland, St. Johns, NL, Canada A1B 3X5; tel.: +1-709-864-6259; fax: +1-709-864-7680; atiq.siddiqui@mun.ca.

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  • Manish Verma

    1. Faculty of Business Administration, Memorial University of Newfoundland, Canada
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Abstract

Maritime transportation is the major conduit of international trade, and the primary link for global crude oil movement. Given the volume of oil transported on international maritime links, it is not surprising that oil spills of both minor and major types result, although most of the risk-related work has been confined to the local settings. We propose an expected consequence approach for assessing oil-spill risk from intercontinental transportation of crude oil that not only adheres to the safety guidelines specified by the International Maritime Organization but also outlines a novel technique that makes use of coarse global data to estimate accident probabilities. The proposed estimation technique, together with four of the most popular cost-of-spill models from the literature, were applied to study and analyze a realistic size problem instance. Numerical analyses showed that: a shorter route may not necessarily be less risky; an understanding of the inherent oil-spill risk of different routes could potentially facilitate tanker routing decisions; and the associated negotiations over insurance premium between the transport company and the not-for-profit prevention and indemnity clubs. Finally, we note that only the linear model should be used with one of the three nonlinear cost-of-spill models for evaluating tanker routes.

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