The big picture
On April 20, 2010, an explosion aboard the Deepwater Horizon oil rig and the resulting oil spill set off a chain of events that continues to have economic repercussions for the Gulf Coast. Determining the economic impact of the spill remains challenging due to numerous variables. Some of these variables are the amount of time before the leak is stopped, wind direction, water currents, amount of oil that reaches the coast and where it reaches the coast, effectiveness of dispersion efforts, efficiency of cleanup efforts on shore, and amount of BP and federal spending.
The Federal Reserve Bank of Atlanta continues to monitor the economic implications of the oil spill both by examining relevant data and by reaching out to business and community contacts through its Regional Economic Information Network (REIN).
To date, the oil spill remains a regional event; local communities are clearly suffering. The national economy, however, has not been affected. For the spill to have national implications, it would have to hit the energy and transportation sectors. It has not interrupted energy production nor has it affected shipping facilities.
In the long term, though, the oil spill could have profound effects. For example, the full environmental effects are not yet clear, nor is it clear if and how environmental damage will play through to the Gulf Coast economy. It is also not clear what type of longer-term energy policy changes may occur as a result.
Louisiana produces 1.4 million barrels per day of crude oil (2010 average to date), or 27 percent of all U.S. crude oil production. In addition, 6.1 million barrels per day of crude oil and petroleum products (2010 average to date) enter the country through the Gulf Coast, accounting for 48 percent of all U.S. crude and petroleum imports.
In the wake of hurricanes Katrina and Rita in 2005, crude oil input into Gulf Coast refineries fell by more than half. A similar decline occurred in 2008 with hurricanes Gustav and Ike. Both times, gasoline prices spiked as a result, but damage was quickly repaired and production/refining rebounded within a month.