Almost two weeks after the MV Rena ran aground at Astrolabe Reef, Prime Minister John Key met Tauranga businesses while his Government was deciding whether to put together a financial package to help those affected by the oil spill. Executive Update's economic correspondent Bob Edlin reports.
By then, the stricken ship had spewed some 350 tonnes of oil into the sea.
Cabinet was debating a package but one of its problems was (and is) that the full impact is not yet known.
ANZ economists have taken a stab at the economic costs in their weekly Market Focus.
They noted the disaster was “a particularly nasty blow for the Bay of Plenty region which is still working its way through the impact of the devastating PSA kiwifruit virus”.
Measuring the weight of the blow in dollar terms, they reckoned the cost could range from $14 million to $53 million.
Uncertainty was a handicap for the ANZ, too. The oil spillage was small in relation to recent disasters, but, as its economists say, “it is the unknown cost of the downstream effects that really worry us”.
A lack of specialist knowledge was another caveat. The economists declared they were not experts on shipping, oil spills or disaster damage.
“But we can make use of academic literature on the matter and make an informed estimate of what the costs may be.”
The ANZ referenced a paper that analysed the cost of spills across the world to determine how factors such as the type and amount of oil, proximity to shore and length of coastline affected clean-up costs.
The ANZ applied those factors to arrive at a range of estimates, examined across three dimensions.
Among the several uncertainties, they said it is unclear how much of the tab will be picked up by the Crown.
News media had reported that a maximum of $12 million might be recoverable under existing laws but this could still leave a significant shortfall for the Government to meet.
An average of the ANZ’s three estimates yielded an indicative estimate of $34 million, consistent with the recent “tens of millions” comment by Transport Minister Steven Joyce.
Joyce also noted the clean-up cost for the oil estimated to have been spilt is around $3.5 million. Extrapolating this across the full 1900 tonnes oil on board gave a figure of $22 million.
But, he said, “what really matters is the extent of downstream impacts”: disruption to shipping; costs to the environment; and the impact the spill will have on confidence and tourism.
The Bay of Plenty economy accounts for around five percent of national GDP.
The Green Party had more hard data (albeit somewhat dated) in a media statement last week urging the Government to start putting together a financial support plan for businesses affected by the disaster.
The Bay of Plenty's fishing sector was worth $24 million in 2006. The Bay's tourism sector was worth considerably more at $435 million in 2009.
The region fortunately had a diverse economy, but the local fishing and tourism sectors would be hit hard by the disaster and compensation from the Government was entirely appropriate, co-leader Russel Norman said.
Mr Key met the Tauranga Chamber of Commerce on Tuesday 18 October and identified about 100 businesses threatened by the disaster.
He later told Radio New Zealand it was likely the affected companies would suffer badly if the disaster was not resolved by the time school holidays began in late December.
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