Oil spill’s economic damage may not go beyond Gulf
The BP oil spill has hammered the fishing and tourism industries along the Gulf of Mexico. But it appears the economic damage to the rest of the nation will be limited.
Analysts say the spill will reduce economic growth by only about one-half of 1 percentage point this quarter, and even less during the second half of the year. Even for an economy as large as the United States' - $14.6 trillion - a $73 billion cut is barely a nick.
- Spending on tourism is moving elsewhere. Beachgoers who might have headed for Pensacola, Fla., for example, are looking toward Atlantic coast sites such as Myrtle Beach, S.C. Gulf hotel rooms going unused by tourists are being booked by cleanup crews.
- Damage to Gulf fishermen may last, but, as with tourism, the Gulf's commercial fishing makes up only a tiny fraction of the U.S. economy. And most fish eaten in the United States is imported, says Michael Feroli, an economist at JPMorgan Chase.
- The Gulf energy industry, which makes up about 10 percent of the regional economy, is not vital to the nation's. The six-month ban on deepwater drilling that a judge blocked Tuesday would only deduct about 0.03 percent from the U.S. economy.
- If deepwater drilling becomes too much of a financial burden and oil companies move their rigs abroad, coastal communities would be hurt in Louisiana and Texas would be hurt. But the national impact would be slight because of how small a portion of U.S. oil consumption the Gulf supplies, says Ed Friedman, economist at Moody's Analytics -less than 10 percent.
The local communities will suffer damage to their economies and environments for years, even if the spill is capped later this summer. Wells Fargo economist Mark Vitner estimates that up to 250,000 Gulf jobs in fishing, tourism and energy will be lost in the second half of the year.
The new jobs in cleanup won't make up for what's been lost, and will probably pay less, Vitner and others say. Consumers in the region will spend less as a result.
That will lower the U.S. economy's growth rate in the July-to-September quarter by a slight 0.2 percentage point, Vitner said. He envisions little or no effect on growth in the fourth quarter of the year, assuming the leak is plugged by then.
Some cleanup jobs are paying $15 to $18 an hour. By contrast, the thousands of rig workers idled by the deepwater drilling moratorium earn up to $1,800 a week - roughly $45 an hour, trade groups estimate. That amounts to a collective loss of tens of millions of dollars in pay.
Fishermen earn less - on average about $13 an hour, the U.S. Bureau of Labor Statistics says. But the destruction of fishing industry jobs is still taking a heavy toll.
Take Rocky Ditcharo, a dock owner in Plaquemines Parish, La., whose family has been in the shrimping business for four generations. Shrimpers sidelined by the spill aren't using his dock. Neither are boats involved in containing the spill by laying booms.
Ditcharo, 44, survived Katrina and other hurricanes. But he fears this may be the end of his business.
"I'm in dire straits," he says.
BP has committed to a $20 billion fund for oil-spill victims. In addition, it will pay $100 million into another fund to help oil workers sidelined by the moratorium on deepwater drilling. And President Barack Obama has pledged additional resources to the coastal states, though he hasn't provided details.
Yet despite the promises by BP and the government to restore the region, economists say they fear some affected people and businesses will still be awaiting help years from now. Vitner points to Hurricane Katrina and New Orleans, where many buildings and homes await restoration. Businesses are still shuttered.
Vitner and others fear a similar scenario this time: A local economy remains devastated even as the national economy moves ahead.
"This particular situation is much more than can be measured by GDP," says Lynn Reaser, president of the National Association for Business Economics. "It is a real tragedy for people's livelihoods and culture in the region."