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Economic Impact of the Gulf Oil Spill

VIEWS: 0 PAGES: 17

									                  Economic Impact of
                    the Gulf Oil Spill




Mike Chriszt
August 10, 2010
Where the Oil has been: cumulative view of oil
location at sea and where it has come ashore.




Source: NYT
                                                 2
Where the Oil is today:




                          3
The Scope of the Spill


                         •   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.




                                                           4
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.




                                Gulf Offshore Facts:

                                  8% of total U.S.
                                     crude oil
                                   consumption

                                21% of proven U.S.
                                crude oil reserves




                                                       6
  National Impacts: Energy production has not
  been significantly affected.




                               Swings in
                               output =
                            @ 3.3% of total
                            U.S. crude oil
                              production




Source: US Dept of Energy

                                                7
  National Impacts: Crude oil inputs into Gulf
  Coast refineries have not been interrupted.




                            As a result, prices
                            have been largely
                               unaffected.



Source: US Dept of Energy

                                                  8
  National Impacts: Past hurricane events have
  affected refinery inputs. The spill has not.




Source: US Dept of Energy

                                                 9
National Impacts: Shipping lanes remain open
and port activity has not been affected.




       Navigation & mitigation are expected to keep goods flowing.

                                                                     10
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.


    $mil
                                             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.

Source: National Marine Fisheries Service
                                                                         12
Aquaculture: The Long-Term Unknowns

• “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.

                                                                       13
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%            Also driven by Tourism:
     Houma                  8.0%                  Retail sales
     Biloxi                20.3%            Hotel and rental income
     Mobile                 8.8%        Recreation services (like fishing)
     Pensacola             10.9%
     Ft. Walton            15.4%                 Tax Revenue
     Panama City           16.3%
     USA                   10.0%




                   100k Direct Leisure & Hospitality Jobs

                                                                             14
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.
                                                                            15
Consumer Confidence Takes a Hit. The regions most directly
affected showed significant declines.




University of Florida’s Consumer Confidence measure also fell in June & July.

                                                                                16
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.
                                                                            17

								
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