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Economic Impact of
the Gulf Oil Spill
Mike ChrisztAugust 10, 2010
Where the Oil has been: cumulative view of oil location at sea and where it has come ashore.
2
Source: NYT
Where the Oil is today:
3
The Scope of the Spill
4
• The Ixtoc blowout and resulting destruction in 1979 was the Gulf’s first major spill.
• It was the largest accidental oil spill on record until Deepwater Horizon.
• Ixtoc has some similarities to our current situation.
The Gulf Coast is a major energy producing and refining center.
5
Gulf Offshore production is a key part of the U.S. energy supply.
6
Gulf Offshore Facts:
8% of total U.S. crude oil
consumption
21% of proven U.S. crude oil
reserves
National Impacts: Energy production has not been significantly affected.
7
Source: US Dept of Energy
Swings in output = @ 3.3% of total U.S. crude oil
production
National Impacts: Crude oil inputs into Gulf Coast refineries have not been interrupted.
8
Source: US Dept of Energy
As a result, prices
have been largely
unaffected.
National Impacts: Past hurricane events have affected refinery inputs. The spill has not.
9
Source: US Dept of Energy
10
National Impacts: Shipping lanes remain open and port activity has not been affected.
Navigation & mitigation are expected to keep goods flowing.
Regional Impact: Fishing & Aquaculture -- Significant impact on some coastal communities, but little impact nationally.
11
Fishing-related activity’s share of national and regional GDP is relatively small, but significant in some coastal areas.
12Source: National Marine Fisheries Service
Gulf commercial sales were $8.5 billion in
2008.
Total jobs in commercial fishing =
170K.
$mil
Gulf recreational sales were $8.8 billion in
2008.
Total jobs in recreational fishing =
88K.
$mil
Aquaculture: The Long-Term Unknowns
13
• “The longer term effects may be larger than any short term effects, depending on how much is spilled, how broadly distributed the spill gets, and what species will be affected.
• Recruitment failure could occur for some species which means that a year class will be gone.
• The effects of losing a year class will not be immediately evident but will be reflected in subsequent years.” -- Marine Fisheries Service
Under-reported Harvesting: Many fisherman operate outside the market, so the overall impact is likely greater than what is directly measurable.
14
Regional Impact: Tourism – Leisure & Hospitality Sector is very important along the Gulf Coast.Leisure & Hospitality Employment
as a percent of total employment:
Lafayette 10.2%New Orleans 13.0%Houma 8.0%Biloxi 20.3%Mobile 8.8%Pensacola 10.9%Ft. Walton 15.4%Panama City 16.3%USA 10.0%
100k Direct Leisure & Hospitality Jobs
Also driven by Tourism:Retail sales
Hotel and rental incomeRecreation services (like fishing)
Tax Revenue
15
Regional Impact: Tourism -- Significant impact on some coastal communities, but some offsets limit national impact.• Cancellations of rental homes and hotel rooms have
increased, with the former being much more affected than the latter.
• Several hoteliers noted very high occupancy rates in part because of the influx of cleanup workers, oil company personnel, and National Guardsmen.
• We also have received numerous reports of reduced seasonal hiring by tourism businesses, and reduced sales and rentals of vacation properties.
• We have also received some reports of increased tourism activity in the non-affected coastal areas of the Southeast. For instance, contacts on the east coast of Florida are noting increases in hotel bookings.
• This could help mitigate some of the overall impact on national tourism spending.
Consumer Confidence Takes a Hit. The regions most directly affected showed significant declines.
16
University of Florida’s Consumer Confidence measure also fell in June & July.
17
Summary
Economic impact of the oil spill cannot be estimated with any precision.
Significant negative effects on parts of the region’s economy, especially the tourism and fisheries industries, with various associated industries affected indirectly.
The longer-term uncertainties are substantial.•Ecological damage•Clean up duration -- amount of oil spilled may not be known for years•Gulf Coast Brand•Energy Policy
Most important for the near-term outlook, transportation hubs and energy supplies have avoided significant disruption.