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The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


December 12, 2012

Energy Renaissance

Professor David Dismukes, associate director of the Center for Energy Studies at Louisiana State University (LSU), said in his presentation to the Atlanta Economics Club on December 11 that the United States is "entering an energy renaissance period." He added that the outlook is very bright and that the "United States—and North America generally—has quickly become one of the most attractive regions for new investment."

LSU's Center for Energy Studies provides energy information and analysis that respond to the needs of the legislature, public agencies, and business and civic groups. The center also maintains some very useful and unique energy databases. Dismukes has been on the LSU faculty for over a decade, and since that time has led a number of the center's research efforts on topics associated with almost all aspects of the energy industry.

New natural gas availability is having a considerable impact on all energy markets today and on a longer-term, forward-looking basis. The increase in production from shale is now migrating into liquids and crude oil production. Dismukes said that "the expansion of this revolution is increasing liquids production as well as facilitating additional natural gas production despite low prices."

"Reserve development, production, and capital expenditures are all up to record levels," he continued. He believes that the effect on hiring will be significant as the energy infrastructure expands. There will also be considerable economic development opportunities through lower energy costs.

Developments will change energy market dynamics, including those associated with clean energy initiatives and renewables, nuclear power, carbon capture and storage, and energy efficiency. "Renewables have a bright outlook, and the economics have seen significant improvements." Currently, 37 states have renewables portfolio standards policies in place that should continue to increase demand for renewables.

Regionally, the impact of the energy boom will be felt most directly in Louisiana, where most of the Southeast's energy infrastructure is located. But the longer-term implications of cheap, abundant, and diverse sources of energy will be significant for the rest of the country as well.

Photo of Michael ChrisztBy Michael Chriszt, a vice president in the Atlanta Fed's research department

June 30, 2010

The Gulf spill's employment effect: Early evidence

In an attempt to gauge the oil spill's impact on employment, we've been tracking initial unemployment insurance claims for the coastal regions of Louisiana. Looking at weekly initial unemployment insurance claims, which are first-time applications for unemployment insurance, provides an indication of week-by-week changes in employment for coastal Louisiana parishes and is thus a high-frequency view of employment trends. We developed two measures: one for all coastal parishes, and another that includes Jefferson and Lafayette parishes. Jefferson extends to the coast, but the vast majority of employment in this parish is located in the suburbs of New Orleans, and Lafayette Parish is home to many people employed in oil and gas drilling and related services. Neither measure includes Orleans Parish.

For the Louisiana coastal regions, there was little immediate effect on initial claims data after the spill on April 20, which is not particularly surprising since the true extent of the spill remained unknown at the time. Late May saw the beginning of an increase in claims. This trend was short lived, however, as an equally marked decrease in new claims followed. In addition, BP's hiring of some out-of-work fishermen and others to assist in the clean-up has likely offset some of the job losses.

063010
(enlarge)

We are also looking at data about initial unemployment claims by industry, which are available on a monthly basis. Through May, the job losses do not seem to be centered in any particular region or industry in Louisiana. This situation may change as time goes on, and weekly initial claims will be a good indicator to watch.

The Atlanta Fed will continue to watch employment indicators for the coastal regions of Louisiana and the Gulf. More detailed job analysis will be available in late July when the U.S. Bureau of Labor Statistics releases June state- and metro-level employment data.

By Brian Goodman, an intern in the Atlanta Fed research department

June 2, 2010

A regional event, for now

In the short term, the Gulf oil spill has largely been a regional economic event. Gulf area aquaculture and tourism businesses have been affected, but for the spill to have national implications, the energy and transportation sectors would have to be interrupted. So far, energy production has not been disrupted and shipping facilities remain open and are operating normally.

Any interruption in oil production, imports or both would have a significant impact on supply. According to the U.S. Department of Energy, Louisiana produces 1.4 million barrels per day of crude oil (2010 average to date), accounting for 27 percent of all U.S. crude oil production. Each day, 6.1 million barrels 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 product imports.

An extension of the moratorium on new deepwater drilling has not affected prices. However, David Kotok of Cumberland Advisors pointed out in Part 6 of his "Oil Slickonomics" commentary that the longer-term implications of the oil spill hold important price influences.

"Our expectation is that the oil business is about to enter a period of intense scrutiny and regulation worldwide. It will confront higher cost structures and much more inspection and regulation. This will eventually be reflected in higher oil prices."

According to data from the Port of New Orleans, the Mississippi River remains open to maritime traffic, and no ship calls have been canceled because of the spill. Port statistics show that about 500 million tons of cargo passes through the Mississippi each year, and more than 6,000 ocean vessels annually move through New Orleans on the Mississippi River. Any disruption to these facilities would have an impact beyond the port as the flow of goods reaches well beyond Louisiana.

Of course, the longer the spill goes unabated, the greater the chances that the oil production and imports could be affected and port activity could be influenced. The opportunity for the oil slick to spread throughout the Gulf also increases daily, as do the chances that it may move out of the Gulf and up the East Coast. In terms of the geography affected by such events, the regional nature of the Gulf oil spill will become more national in proportion.

By Michael Chriszt, assistant vice president in the Atlanta Fed’s research department

May 26, 2010

The Gulf oil spill and northwest Florida

Several universities in the region have shared their thoughts and ideas concerning the economic impact of the Gulf oil spill. As members of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN), these experts provide valuable insight into local economic conditions. This week's SouthPoint highlights one such contributor, Dr. Rick Harper, director of the Haas Center for Business Research and Economic Development at the University of West Florida.

In addition to the direct negative economic impacts resulting from the spill on sectors such as tourism and commercial fishing, Dr. Harper notes in a recent report that

"It will also be seen in diminished asset values that reflect expected future lost profitability due to the damage to their income-producing potential. Above and beyond these market transactions, it will be seen in lost well-being of residents, visitors, and others who value our natural assets."

Measuring the direct impact on tourism is complicated by the fact that the Gulf Coast is largely a "drive-to" destination and that many vacationers do not plan their trips far in advance. As a result, Harper contends that

"[F]ears that the oil spill may reach our [northwest Florida] shores this spring or summer is clearly causing visitors to change their summer vacation plans. For potential visitors, alternative vacation destinations or activities instead of a Florida Gulf Coast beach vacation become much more attractive once the risk of encountering the ongoing oil spill is factored in."

Much of the focus on the spill's impact on the tourism sector has focused on 2010. But Dr. Harper points out that not only is the current season in jeopardy, but there are possible implications beyond this year.

"Under the best-case scenario, in which the spill is completely stopped and it never reaches our shores, this negative impact to the Florida visitor industry may be largely limited to the 2010 summer season. If the spill does reach our shores, affected areas are likely to suffer longer-lived damage to one of our most valuable income-generating assets—the Florida brand image of pristine beaches, beautiful marshes, and abundant fish and wildlife."

Harper's conclusion recognizes the fact that the economic impact of the oil spill on Florida cannot yet be calculated with precision.

"However, the effect will be substantial, even if the spill never reaches our shores, because of the important role that perceptions play in planning and decision-making for our customers. The effects will be seen first in our visitor industry, including all of the businesses that rely on visitor spending in the key summer season. Those effects will have collateral damage as they ripple through the economy. Changes in asset values will be more severe if the perceptions of risk and damage are more pronounced and non-market valuations of environmental amenities will also suffer. The fiscal impact to local and state government will be seen in reduced revenue and increased spending. These effects will only become larger should a hurricane or tropical storm exacerbate the potential for damage. The more quickly the oil flow can be completely stopped, and the spill contained, the less the damage will be."

By Michael Chriszt, assistant vice president in the Atlanta Fed's research department

December 12, 2012

Energy Renaissance

Professor David Dismukes, associate director of the Center for Energy Studies at Louisiana State University (LSU), said in his presentation to the Atlanta Economics Club on December 11 that the United States is "entering an energy renaissance period." He added that the outlook is very bright and that the "United States—and North America generally—has quickly become one of the most attractive regions for new investment."

LSU's Center for Energy Studies provides energy information and analysis that respond to the needs of the legislature, public agencies, and business and civic groups. The center also maintains some very useful and unique energy databases. Dismukes has been on the LSU faculty for over a decade, and since that time has led a number of the center's research efforts on topics associated with almost all aspects of the energy industry.

New natural gas availability is having a considerable impact on all energy markets today and on a longer-term, forward-looking basis. The increase in production from shale is now migrating into liquids and crude oil production. Dismukes said that "the expansion of this revolution is increasing liquids production as well as facilitating additional natural gas production despite low prices."

"Reserve development, production, and capital expenditures are all up to record levels," he continued. He believes that the effect on hiring will be significant as the energy infrastructure expands. There will also be considerable economic development opportunities through lower energy costs.

Developments will change energy market dynamics, including those associated with clean energy initiatives and renewables, nuclear power, carbon capture and storage, and energy efficiency. "Renewables have a bright outlook, and the economics have seen significant improvements." Currently, 37 states have renewables portfolio standards policies in place that should continue to increase demand for renewables.

Regionally, the impact of the energy boom will be felt most directly in Louisiana, where most of the Southeast's energy infrastructure is located. But the longer-term implications of cheap, abundant, and diverse sources of energy will be significant for the rest of the country as well.

Photo of Michael ChrisztBy Michael Chriszt, a vice president in the Atlanta Fed's research department

June 30, 2010

The Gulf spill's employment effect: Early evidence

In an attempt to gauge the oil spill's impact on employment, we've been tracking initial unemployment insurance claims for the coastal regions of Louisiana. Looking at weekly initial unemployment insurance claims, which are first-time applications for unemployment insurance, provides an indication of week-by-week changes in employment for coastal Louisiana parishes and is thus a high-frequency view of employment trends. We developed two measures: one for all coastal parishes, and another that includes Jefferson and Lafayette parishes. Jefferson extends to the coast, but the vast majority of employment in this parish is located in the suburbs of New Orleans, and Lafayette Parish is home to many people employed in oil and gas drilling and related services. Neither measure includes Orleans Parish.

For the Louisiana coastal regions, there was little immediate effect on initial claims data after the spill on April 20, which is not particularly surprising since the true extent of the spill remained unknown at the time. Late May saw the beginning of an increase in claims. This trend was short lived, however, as an equally marked decrease in new claims followed. In addition, BP's hiring of some out-of-work fishermen and others to assist in the clean-up has likely offset some of the job losses.

063010
(enlarge)

We are also looking at data about initial unemployment claims by industry, which are available on a monthly basis. Through May, the job losses do not seem to be centered in any particular region or industry in Louisiana. This situation may change as time goes on, and weekly initial claims will be a good indicator to watch.

The Atlanta Fed will continue to watch employment indicators for the coastal regions of Louisiana and the Gulf. More detailed job analysis will be available in late July when the U.S. Bureau of Labor Statistics releases June state- and metro-level employment data.

By Brian Goodman, an intern in the Atlanta Fed research department

June 2, 2010

A regional event, for now

In the short term, the Gulf oil spill has largely been a regional economic event. Gulf area aquaculture and tourism businesses have been affected, but for the spill to have national implications, the energy and transportation sectors would have to be interrupted. So far, energy production has not been disrupted and shipping facilities remain open and are operating normally.

Any interruption in oil production, imports or both would have a significant impact on supply. According to the U.S. Department of Energy, Louisiana produces 1.4 million barrels per day of crude oil (2010 average to date), accounting for 27 percent of all U.S. crude oil production. Each day, 6.1 million barrels 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 product imports.

An extension of the moratorium on new deepwater drilling has not affected prices. However, David Kotok of Cumberland Advisors pointed out in Part 6 of his "Oil Slickonomics" commentary that the longer-term implications of the oil spill hold important price influences.

"Our expectation is that the oil business is about to enter a period of intense scrutiny and regulation worldwide. It will confront higher cost structures and much more inspection and regulation. This will eventually be reflected in higher oil prices."

According to data from the Port of New Orleans, the Mississippi River remains open to maritime traffic, and no ship calls have been canceled because of the spill. Port statistics show that about 500 million tons of cargo passes through the Mississippi each year, and more than 6,000 ocean vessels annually move through New Orleans on the Mississippi River. Any disruption to these facilities would have an impact beyond the port as the flow of goods reaches well beyond Louisiana.

Of course, the longer the spill goes unabated, the greater the chances that the oil production and imports could be affected and port activity could be influenced. The opportunity for the oil slick to spread throughout the Gulf also increases daily, as do the chances that it may move out of the Gulf and up the East Coast. In terms of the geography affected by such events, the regional nature of the Gulf oil spill will become more national in proportion.

By Michael Chriszt, assistant vice president in the Atlanta Fed’s research department

May 26, 2010

The Gulf oil spill and northwest Florida

Several universities in the region have shared their thoughts and ideas concerning the economic impact of the Gulf oil spill. As members of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN), these experts provide valuable insight into local economic conditions. This week's SouthPoint highlights one such contributor, Dr. Rick Harper, director of the Haas Center for Business Research and Economic Development at the University of West Florida.

In addition to the direct negative economic impacts resulting from the spill on sectors such as tourism and commercial fishing, Dr. Harper notes in a recent report that

"It will also be seen in diminished asset values that reflect expected future lost profitability due to the damage to their income-producing potential. Above and beyond these market transactions, it will be seen in lost well-being of residents, visitors, and others who value our natural assets."

Measuring the direct impact on tourism is complicated by the fact that the Gulf Coast is largely a "drive-to" destination and that many vacationers do not plan their trips far in advance. As a result, Harper contends that

"[F]ears that the oil spill may reach our [northwest Florida] shores this spring or summer is clearly causing visitors to change their summer vacation plans. For potential visitors, alternative vacation destinations or activities instead of a Florida Gulf Coast beach vacation become much more attractive once the risk of encountering the ongoing oil spill is factored in."

Much of the focus on the spill's impact on the tourism sector has focused on 2010. But Dr. Harper points out that not only is the current season in jeopardy, but there are possible implications beyond this year.

"Under the best-case scenario, in which the spill is completely stopped and it never reaches our shores, this negative impact to the Florida visitor industry may be largely limited to the 2010 summer season. If the spill does reach our shores, affected areas are likely to suffer longer-lived damage to one of our most valuable income-generating assets—the Florida brand image of pristine beaches, beautiful marshes, and abundant fish and wildlife."

Harper's conclusion recognizes the fact that the economic impact of the oil spill on Florida cannot yet be calculated with precision.

"However, the effect will be substantial, even if the spill never reaches our shores, because of the important role that perceptions play in planning and decision-making for our customers. The effects will be seen first in our visitor industry, including all of the businesses that rely on visitor spending in the key summer season. Those effects will have collateral damage as they ripple through the economy. Changes in asset values will be more severe if the perceptions of risk and damage are more pronounced and non-market valuations of environmental amenities will also suffer. The fiscal impact to local and state government will be seen in reduced revenue and increased spending. These effects will only become larger should a hurricane or tropical storm exacerbate the potential for damage. The more quickly the oil flow can be completely stopped, and the spill contained, the less the damage will be."

By Michael Chriszt, assistant vice president in the Atlanta Fed's research department