The Gulf Oil Spill: Economic Impact

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The Deepwater Horizon oil spill in the Gulf of Mexico is shaping up to be one of the worst environmental disasters that has ever hit the United States.  What’s worse, being just five years after another devastating disaster, Hurricane Katrina, the Gulf Coast region is no doubt in grave danger as the oil continues to spill from the destroyed rig.

In addition to the unprecedented environmental effects that this disaster is sure to wage, there will also be monumental economic implications to the region.

For instance, the three most impacted industries will surely be oil and gas, commercial and recreational fishing, and tourism, which includes everything from beach resorts to restaurants.  According to a recent article by Peter Whoriskey from the Washington Post, “For gulf regions from Texas to Key West, commercial fishing contributes $1 billion to GDP, tourism and recreation contribute $13 billion, and oil and gas contribute $11 billion.”

As of now, the National Oceanic and Atmosphere Administration has blocked off 78,264 square miles of fishing water, which is approximately 32.3 percent of Gulf of Mexico federal waters.  “Though the majority of seafood consumed in the United States is imported, the gulf region accounts for about a fifth of the nation’s oyster production and more than 75 percent of the domestic shrimp output, according to Moodys,” says Whoriskey.

In addition, the Obama Administration has issued a six week moratorium on all deep-water drilling, which is particularly troubling to many industry experts.  The Gulf region produces 30 percent of all crude oil and 12 percent of all natural gas for the United States.  This means that not only will the regional economy suffer, but the entire country will likely see oil shortages in the coming months which would be economically devastating to many other industries.

It is likely that the tourism industry will not see any immediate significant impact as many restaurants and hotels are actually benefiting financially from the increase in relief workers who have flocked to the area.  Only time will tell but when the relief effort subsides, many predict this will be hardest hit industry in the region, especially considering the number of tourists that use the area’s beaches during the summer months.

In a recent webcast hosted by the Brookings Institution, Amy Liu, the Deputy Director of the Metropolitan Policy Project, detailed the economic impact of the Deepwater Horizon spill.  She contends that even though jobs lost and economic impact is grave, the economies in the Gulf are resilient and have overcome adversity in the past.  The main concern now is whether the progress the region has made since Hurricane Katrina, specifically cities reinventing themselves, can continue with the onset of this new crisis.