THE ECONOMICS OF PROTECTIVE AND SAFETY ARRANGEMENTS-A. BILLBERG

(c) The controlling unit

The controlling unit identifies the customer through combining his identification on the card with his personal code and controls a paper tape punch or a printer, where the customer's identification and volume purchased are recorded.

(d) The blocking unit

If a customer fails to pay his bill, there must be a way to prevent him from using his card. The blocking unit makes it possible to block each customer individually.

The customer operates the system by placing his card in the card reader and then pressing his personal code on a set of buttons connected to the card reader. If the combination of the identification code (punched on the card) and the personal code is the right one and if the card is not blocked, the customer will have a green sign. He then obtains the fuel in the same way as at a conventional self-service station.

The idea of a personal code is as follows:

The only one who knows the personal code belonging to his card is the customer himself. This means that, if he loses his card, nobody can use it. Suppose that someone finds a lost card and tries to use it. In the first place, he must know the number of figures in the personal code and in the second place, if he knows that it is for instapce _four figures, he has to choose from among 10,000 combmatlons.

As the customer identifications and the corresponding sales volumes can be recorded on tape, the system makes it possible to rationalize billing routine.

As far as is known, there are three different types of application: (a) service stations (b) customer outlets (c) car parks and parking areas

In conclusion, it can be stated that the trial introduction is of great interest. Whether or not this will be the first step in the direction of the service stations of the future depends upon time and the system itself. It be remembered that a service station is an estabhshment which, in addition to selling fuel, also offers many nical and other services. The need for technical service is constantly expanding, partly due to increased ety demands upon cars through tightened traffic regulat10ns. If an increased automation of the fuel sales can offer the customers advantages and also enables the service station personnel to allocate more time to technical services, then the future of this credit card automat and other systems of this type, appears to be certain.

The Economics of Protective and Safety Arrangements

BY ALFRED BILLBERG STATE INSPECTOR OF EXPLOSIVES AND FLAMMABLE LIQUIDS, SWEDEN

has a large number of safety regulations and these md1':ate the efforts made by society and the individual to protection against various kinds of risks. The cost of this protection is difficult to assess and it is even more difficult to decide whether it is a paying proposition or not. certain cases increased safety requirements can involve •'!creased costs, for example, with safety distances within oil storage depots. In many cases the low average cost of damage does not justify stringent safety requirements. collaboration between the safety authorities and the msurance companies it should be possible to attain a better balance between safety requirements and risks. b society faces quite a lot of risks in the ordinary usmess of life and it would seem that modern developare creating even more and greater risks. For a long by means of different protective and safety regulations has been trying, more or less successfully, to pro-1.tself an_d its citizens against occurring risks. The tnes to protect himself economically through The insurance companies in their turn are .to prote?t their economy through their insurance c_ondttlons. This has resulted in a vast amount of legislalocal requirements, as well as recommendations is.sued m. connection herewith, plus the conditions for different msurances.

It is impossible even to estimate the direct and indirect cos_ts of all these arrangements, and it is still more difficult t? Judge whether the expenses involved with such ttve and safety arrangements are an economic or not. Actually it is only the insurance companies which by the premium rating for different sectors can give us an approximate idea of the financial balance or lack of balance in this field. However, the economic problem cannot be solved by very rough statistical estimates of the costs and the frequency of damage, with the cause of_ damage given only in certain cases: As a rule 1.t is not possible to discern the effect of different detailed measures, which as is well known are often the subject of quite diverging opinions. One has only to mention the very much discussed effect of the speed limits on the road.

The most important are the safety regulations whic_h are based on government orders and legislation. Their purpose is, firstly, to protect life and limb, and, to protect common and private property. Although it is never possible to separate these two main objectives completly, it is obvious that one or other viewpoint will be the dominating one. Even if rather emotional views are taken regarding the risks for life and limb, the aspects cannot be disregarded. However, the problem is more complicated than the one dealing with merely the

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protection of common and private property. Consequently I shall limit myself in the main to the discussion of the economic aspects of the last-mentioned group, namely, damage to property.

Basis for Regulations

In compiling safety regulations it is very natural to start primarily with accidents of the type involved with the nature of the risk which have actually occurred and to try to analyse the causes in order to find suitable protective measures. These may be of a purely technical or constructional kind, for example, regulations concerning construction, safety distances, etc., or working regulations, necessity of inspection and supervision and the like. All this costs money, of course, but in surveys of safety regulations there is never even an attempt made to estimate the costs involved. It is very seldom that statistics of the frequency of accidents of the type in question and the costs they have involved over a number of years are cited as evidence of the need for safety regulations. Cases could even be mentioned where regulations and control systems based on purely theoretical reasoning have been introduced without any cases of accidents being reported. However, in order not to be misunderstood, I should like to point out here and now that there are risks which for various reasons can hardly be analysed purely from the stand point of statistics and economics. ·

One should attempt as a matter of principle to find out as far as possible the frequency of the different types of accidents as well as the frequency of the causes, as the same type of accident can be caused by different reasons. The next question concerns the number of cases involved in this connection. Should the number of cases be very high the consequences for the economy of the country will be more pronounced.

Such general views are reflected in Paragraph 6 of the Swedish regulations concerning flammable goods, where it is stated: "In decisions or orders under this regulation no measures may be prescribed which are more burdensome than are reasonable in regard to the purpose of the measure." However, despite the very general wording of this passage it is extremely significant and it has even attracted a certain attention outside Sweden, but at least up to now it has not brought forth any recommendations to the Swedish authorities to analyse the economic aspects in the way I have just mentioned when . dealing with matters of safety. Although not much progress been made, the extent of the different costs has been discussed unofficially at least within the fields of the Inspectorate of Explosives.

As an example can be mentioned the fact that the damage costs caused by oil burners amount to at the ?O i.ire (8d.) per burner per year, according to the of fire damage. Thus yurely the standpomt there is no reason to mcrease 111 the mam the costs of safety arrangements for oil burners as there is not much to be gained from saving 50 i)re a year. Howeve_r, there is o_ften a possibility of increasing safety by certam constructional improvements made for the purpose of operational safety as well as for reducing service costs, etc., which in themselves can increase safety. Safety for the sake of Safety Inspectors or the Authorities

A very difficult adj_ustment arises applying the safety regulat10ns and mstruct10ns provided for m Government orders, as rightly there should be a certain margin for determining the risks in cases. However, a psychological problem anses m this c<;>nnection in that the supervisory body often reasons m. following manner: an accident can always happen, this is then followed by an enquiry and scrutiny of how the matter has been dealt with and whether adequate safety precautions have proposed or ordered. It is easy for the inspector exammmg the case to adopt the attitude that it is the best for his purpose to propose extra safety measures instead of recommending outright minimum or standard claims. If, as is often the _case, are several inspectors the final result can be qm!e.exce_ss1ve '.lnd much more costly that it need be if the ongmal of the legislators had been applied. there 1s another complication in the fact t_hat bmldm& contractors and other companies involved with construct10n work thro1;1ghout the country become irritable if different regulat10ns apply in different places.

Increased Costs through increased Safety Requirements

As an example of how cost can increase a most unexpected way through extei;isive _safe_ty reqmrements, figures can be cited from the of costs for safety distances made by the Oil Inqmry m 1951.

The annual ground rent for a coastal oil depot a roximately 3 Swedish kronor a sq. it. a sikty distance of25 metres(82ft.) and its surroundings there is a between the ° 50-100 per cent of its within the depot itself, ground area is u_t1hsa e gd ot on the size 0.f then :£ec: The figure of 50 per cent applies to a depot with a 60 000 tive area of approx. 50,000 sq. metres to a sq. yds.), while the figure <;>f 100 per cen s metres smaller depot with an effective area of ground (approx. 15,000 sq._ yds.).' Fo;1tte rent of the protective arft a year, and for the sma er epo 37 OOO ' fti kronor kronor a year, tive area If it i.e. as much as the ground re_nt forth: (ItS4ft.), is required that the safety distance b t ctive area in the then the annual ground the 120 OOO kronor case and of the larger depot w1\ in the case of the sma 67 500 epo. d kronor. If a 100 metres much larger safety distance is reqmre ' area in the (330ft.), the ground rent case. of the larger depot wt the 90 270 OOO kronor ,ooo k;onor. Thus and m the case of the Pt f r the protective area in the latter. case the _grounh rte;!- effective area. will be five times as big as t a ior

The best method would actually_ be to showin how the costs increase with the o . safety cftstance. This safety requirements agamst make hc?sts. s t n it C'lll be menare exponential curves. In t is connec 10 ' 1 ;ioned that it is not only a question of groun.dtl · · d" t nces w1 1111 determining safety distances, i.e. is a . m II f ' tions and between the various parts of a tons, but also a question of increased costs of p1pelmes, roads, etc.

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A few other examples may also be of interest. These show that what appears to be reasonable costs in the individual case can amount to large sums for the country as a whole. For example, the diking-in of fuel tanks for villas and other dwellings is a measure prescribed rather bureaucratically by many municipalities despite the fact that in most cases it cannot be proved to be a real need. The diking-in of a fuel-oil tank of a volume of 3-5 cu. metres (106-107 cu. ft.) costs 400-500 kronor (approx. £28-£35), i.e. about as much as the tank itself. If the owners of the 120,000 villas which were built in Sweden between 1958 and 1963 had been ordered to dike-in fueloil tanks, the costs would have totalled 50 million kronor (approx. £3! million). In order to justify such a cost, such a measure would have to prevent damages totalling some 5 million kronor (approx. £350,000) a year from happening. In actual fact, damages caused by tanks which are not diked-in amount to only some 10,000 (approx. £700 a year). Sweden is now building some 25,000 villas a year. If diking-in is generally prescribed and the average cost is 450 kronor (approx. £30) a villa, this would cost the country 11 million kronor (approx. £800,000) a year. It cannot be shown that damages of the nature in question here, i.e. fire and oil damages, amount to anything even approaching such an annual cost.

The same is the case with dug-down petrol tanks. In many cases different authorities want, without real reasons, to put these petrol tanks in concrete boxes. The additional cost for such an arrangement is of the size of 5,000 kronor (approx. £350) a tank and the corresponding interest and amortisation amount to at least 500 kronor (approx. £35) a year. For a petrol station with 2-3 tanks this means an additional cost of 1,000 kronor (approx. £700) every year.

If there are approximately 5,000 petrol station tanks and 15,000 villa tanks within the danger zone with regard to water pollution, the yearly costs for the concrete boxes would not be less than 10 million kronor (£700,000). The costs of damages resulting from leaks from subterranean tanks and their pipelines do not appear to have been investigated. To date they have certainly not amounted even to one million kronor (£70,000). This proves, firstly, that one must be rather restrained in the laying out of protected areas for water catchment and, secondly, that one must attempt to reduce the costs of the protective methods in those cases where protection is considered to be absolutely necessary. In this connection I must point out that the total number of subterranean tanks in Sweden is estimated at 300,000--400,000. Safety Standard attained in different Industries

The views of the general public and of the government to safety standards necessary within various industries differ markedly. The personal injuries within the manufacture of explosives and the handling of petrol are among the lowest in Sweden. Statistics of injuries caused fire and explosions provide similar data, indeed, more are lost yearly in gravel pits than in explosives factories the petrol industry. Nevertheless, a large accident _w1thm the l_atter industries gives rise to an extensive enqutr}'. further safety measures and safety regulations, despite the economic fact that measures against other industrial risks would probably be more justified.

A survey shows that the Swedish petroleum industry, which in 1963 had a turnover totalling almost 5,000 million kronor (approx. £350 million), has suffered damages costing on average approx. 250,000 kronor (approx. £17,500) a year over the last five-year period from fires which can be considered of a general nature. However, in addition there have been one or more fire catastrophes, such as the large fire at the oil refinery at Nynashamn on the Swedish Baltic coast. Fire catastrophes involve large damage costs averaging some 250,000 kronor (approx. £17,500) a year. The frequency of fire catastrophes in Sweden is fortunately low. Altogether fire damages within the petroleum industry amount to 0.01 per cent of the annual turnover.

Indirect Costs

Up to now we have mainly considered the direct costs of the safety measures, but on top of these there are various indirect costs. There are, firstly, the costs of the national and municipal safety services and organisations, secondly, the inspection costs of the insurance companies, and, finally, the corresponding costs for the trade. In this connection little can be said about the costs of staff and administration. Often the fault seems to be with the slow functioning of the administration. Complaints are made -and rightly so, in my opinion-about the undue amount of paper-work and the difficulty of reducing the piles of paper which amount up on the official's desk.

The difficulties are mainly due to the fact that in compiling laws and regulations the Swedes are often overexacting and do not pay sufficient regard to the limited resources of Sweden both as to its economy and the current lack of staff. All too often the Swedes make the mistake of cutting down the staff and running costs of an organisation without reducing at the same time the amount of work to be done. When accepting a certain system of administration it is necessary to provide the staff and economic resources to run it, otherwise it will be nothing more than a half measure.

The consequences of reducing staff are longer delays both in the field we are dealing with and many others. Before the new regulation concerning flammable goods came into force, the Swedish Inspectorate of Explosives and Flammable Liquids had a good reputation, I believe, for the quick handling of matters. Now the Inspectorate's speed of working in several fields and particularly the petroleum industry is far from satisfactory, though no doubt there are other national and municipal bodies which function even worse.

In this connection it is important to draw attention to the prevailing uncertainty as to how long an appeal against a decision will take. In fact, it has become evident that the long waiting time results in the right of appeal seldom being used, even in cases where there are chances that appeal will be sustained. In this way a wrong practice easily arises as well as the risk of different practices being applied in different places.

Collaboration on Safety Regulations

The Government and in certain cases also the municipalities stipulate certain minimum requirements for In this matter there is a limited collaboration mamly between the state authorities and organisations of the insurance companies. However, this does not prevent the

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insurance companies from making often special insurance conditions with more stringent requirements. It seems to me that this practice is quite wrong. Minimum requirements ought rightly to be sufficient, so that insurance can be granted for all those meeting them. The basic premium ought thus to be calculated on these grounds. To the extent that it is suitable, there is nothing then to prevent the encouragement of higher levels of insurance by granting reductions of premium. Such reductions of premium must be preceded by an analysis of the risk. This will give a very good idea of the conditions of risk in the field in question. Not a few insurance companies make their own insurance conditions for the oil industry.

Technical Insurance Conditions

One can distinguish between three different types of technical insurance conditions in this actual connection. There are those conditions which are identical with those by the Government, for example, certain sect10ns of BABS. In addition, there are conditions which go further than those stipulated by the Government. Finally, are sometimes special conditions for certain machmery or other equipment which are not covered by Government regulations.

In the main, State statistics deal only with industrial injuries while, as can be seen from the above, material damage statistics which are of actual interest in this connection are lacking. Instead of compiling new series of State statistics, the double work which would be involved can .be avoided by collaboration with the insurance compames and particularly their joint body compiling damage statistics. By this means there would be considerable gains from the organisation and economic standpoints.

However, it is obvious that such collaboration cannot be brought about at a moment's notice, as a lot of problems are involved. Also a lot of the current insurance conditions are definitely of such a nature and based on experience that they ought to be incorporated in the minimum requirements of the Government regulations in order to make it possible for the insurance companies to grant ins1;1rance at standard premiums generally, i.e. without their own additional requirements.

What is most important from the point of view of the authorities is that the code system for the statistics of fire dam!ige needs to be altered and supplemented. If one studies the statistics of fire damage and tries to use them to get an idea of the risks, one finds that the codification cannot be used just as it is. The fact is that it does not to the types of risks in the Government regulat10ns. As an example I can mention that the statistics of fir_e damage include a code for the group of fire damages r_ela!mg to "furnaces and heating arrangements using h9u1d fuel''.- This concept covers things as different as 011-fired ballers of different sizes from boilers for villas to cei;it_ral heating installations, as well as paraffin stoves, spmt stoves, etc. It is true that it is useful to know that the costs of damage on average does not amount to more approx. 500,000 kronor (approx. £35,000) a year, and this must be regarded as a very favourable figure with regard to the enormous number of items included in this group-a few millions, in fact. However, in order to be . to base safety regulations on these statistics the 1v1s10ns must be more specific. Concluding Remarks

Economic views on safety matters automatically involve a number of problems, of which the most important concern the surveying of the possibilities of modifying and supplementing the statistics of fire damage in this field. Such improved statistics could then form the basis for Government regulations, too. This would eliminate all the different insurance conditions of a technical nature which are now imposed by the insurance companies.

Also recommendations or instructions should be issued to the authorities concerned to the effect that when safety requirements above the normal are made then the economic consequences should be touched upon in some way, at least in the form of estimates. As a rule those applying for insurance can be helpful in this respect. Even now they often raise objections with reference to the extra costs, but this is hardly ever reflected in official statements. Finally, as a general rule the municipalities should not be allowed to impose special regulations without these first being approved by the responsible Government organisation.

NOTES AND NEWS-continued from page 51

90 Ton Bogie Rail Tank Car

Shell-Mex and B.P. Ltd. have developed a 90 ton bogie rail tank car for operation on British Rail. The rail car has been designed and manufactured by MetropolitanCammell Ltd., in conjunction with Shell-Mex and B.P. Ltd., and it is more than twice the payload capacity of largest rail tank cars already in service in the U.K. It will be possible by using such vehicles to carry pay loads of 65 tons of product and to operate block trains of bogie tank wagons at 60 m.p.h. over thirteen major routes between refineries, customers and installations. The tank barrel is 8ft. o.d. and 54ft. IOin. in overall length, giving a gross capacity of approximately 20,130 gallons. Dished end plates are iin. thick and the whole is a buttwelded fabrication, hydraulically tested to 24lb. p.s.i. Discharge facilities are by 4in. foot valves, connected to a fabricated double arm branch pipe, fitted with 4in. ball valves.

Three Pipe Lines Authorised

The Minister of Power, Frederick Lee, has authorised the building of three cross-country pipelines in the of England. The three firms concerned are lmpenal Chemical Industries, which applied for permission to build an ethylene pipeline from Wilton, Tees-side, to Runcorn, Cheshire, with a branch to Thornton, Lancashire; Shell U.K. for a crude line between Stanlow Heysham refineries; and Shell-Mex and B.P. for a oil products line from Stanlow refinery to an mstallatton at Haydock, Lancashire.

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