Economic Impact of the BP Drilling Disaster

Many economists are waiting to create an economic impact statement for the BP drilling disaster until after the oil stops gushing out into the Gulf of Mexico. An economic impact statement is important for many reasons: (1) it will give a better idea to people of the severity of the disaster; (2) it will help those affected by the disaster to claim a more accurate, and likely much higher, assessment of how they have been adversely affected by the disaster; and (3) an economic impact statement will assist in the Natural Resource Damage Assessment (“NRDA”), which BP will have to pay in order to repair and restore impacted natural resources. Aside from the ecological damage from the disaster, the major industries impacted from the disaster are commercial fishing, recreational fishing, and tourism.The BP drilling disaster has hampered, if not shut down, the business of commercial fishing along the Gulf coast. In fact, eight of the top 50 ports in the United States, ranked by dollar value, are on or near the federal waters that have been closed due to the BP drilling disaster. Based off of 2008 totals, the total amount of money earned annually from the ports that are currently being affected by the spill is $265.8 million. Most economists use a multiplier between 1.5 and 3.0 to account for the wholesale and retail market chain value stemming from commercial fisheries. Assuming, for arguments sake, that all of the ports are, or will be, completely shut down, this would also halt between $398.7 million and $797.4 million of annual wholesale and retail market activity. In total, the commercial fisheries being shut down could result in more than $1 billion of lost economic value annually just among the states of Louisiana, Mississippi, and Alabama.While much more money is made in commercial fishing than recreational fishing, creating an economic impact statement for recreational fishing is still very important as there are over 2-million marine anglers on the Gulf coast. Unfortunately, BP’s drilling disaster’s economic impact on recreational fishing is difficult to total. Coming up with a recreational fishing economic impact statement is hard because most of the data collected is through surveys; collecting and totaling surveys is a very long process. Because recreational fishermen do not record when and how often they go out, surveys are a good way to measure the impact of a disaster. Survey data has yet to be collected post-disaster, but when it does the survey will measure, among other things, the difference in amount of trips taken by recreational fishermen before and after the BP drilling disaster.One of the biggest unknowns, in creating the economic impact statement, is the affect of the BP drilling disaster on tourism. Measuring why someone chose to cancel dinner, hotel, and flight plans is complicated as there are many variables involved. For example, did someone cancel a hotel reservation in Pensacola because they chose to work an extra week at home or was it because of the oil in the Gulf of Mexico?A long-term economic statement has yet to be published, and it will likely not be published for some time. When speaking to some economists, they said that the economic impact statements created from previous hurricane seasons will pale in comparison, and dollar value, to the economic impact statement for BP’s drilling disaster.

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