Southeastern Economic Perspectives
The Gulf Oil Spill
May 17, 2010
Moderator: Welcome to Southeastern Economic Perspectives, an occasional podcast from the Federal Reserve Bank of Atlanta. I'm Jean Tate, and the following comments discuss the impact of the oil spill off the Louisiana coast. Michael Chrizt, an assistant vice president responsible for the Regional Economic Information Network, joins me. Thanks, Mike.Michael Chriszt: You're welcome, Jean—it's a pleasure to be here.
Moderator: So, what is the latest on the oil spill?
Chriszt: Well, so far the efforts to cap or stem the leak haven't been successful, which has been pretty disappointing. Efforts to contain the spill using dispersants, skimming, recovering the oil that's on the surface, even burning it when possible…well, that's helped, but the amount that's still being released is significant. Booms and barriers are being placed along the coast in the most threatened areas. The latest number that I had, Jean, was 1.5 million feet of boom had been placed around beaches and shorelines.
Here in Atlanta, we're working to keep up with the events and assess the economic implications of the spill on a regular basis. We're tapping into our Regional Economic Information Network. Our regional executives throughout our branches are contacting not only their directors but also people in their advisory councils. Agriculture, tourism, energy advisory councils have been quite helpful in helping us understand the economic implications of the event.
Moderator: So do you have a sense of the likely economic impact, or is it still too early to estimate dollar figures?
Chriszt: I think it is too early to throw around dollar amounts. We've been very careful in our discussions—both in-house and out in public—to note that determining the economic impact of the spill is really impossible at this point because there are simply too many variables at work. You know, we're talking about things like the amount of time that it takes before the leaks are capped; direction of the wind, wave action, water currents, the amount of oil that actually does reach the coast; the effectiveness of the dispersion efforts; the efficiency of the cleanup efforts; the amount of federal spending; the list goes on and on, so measuring the cost of the spill at this point is simply out of reach.
That said, it's clear that there are several industries that are at risk. Aquaculture, for example: Fishing, shrimping, oyster farming, and seafood processing in the area are definitely at risk. The tourism and recreation industry is also being affected; we've received reports of cancellations from Louisiana all the way to southwest Florida. But they really haven't been as dire as we feared early on. That's not to say that these cancellations won't increase if conditions worsen.
Moderator: You mentioned the amount of oil that's coming out of the spill. How does this compare to what happened in Alaska in 1989?
Chriszt: Jean, that's a really great question. And I'd have to say that the only real comparison here is that they both involved a manmade oil spill. It's a different event in so many different ways. We're talking about a different kind of oil that's been released. In Alaska it was refined crude, that black, tarry, sticky stuff. In the Gulf it's raw crude, so it's more of a brownish, honey-ish kind of a consistency to it. So it's a different kind of spill in that regard.
Also, in Alaska it was an immediate impact, whereas the situation in the Gulf is ongoing as the leak continues. In 1989 in Alaska, the spill occurred in a confined place, whereas today it's happening in open water. Things as simple as the water temperature have a big impact, and the difference between the temperature of the water in Alaska and the temperature of the Gulf is having a large effect on how the spill is being contained. You know, now that I think about it, I should have taken some geology and chemistry courses in college instead of taking microbiology as my elective. But you know, even if you talk about what kind of shoreline is up there—a rocky shore versus a sandy or a marshy shore—it's an environmental impact that's definitely happening in both occurrences. But I'd have to say, in the case of what's happening now in the Gulf, the economic impact has the potential to be much greater.
Moderator: So, you mentioned the economic impact. There've been some good reports from labor markets recently that have been encouraging. Do you see any impact on employment as a result of the oil spill?
Chriszt: Well, we don't have any solid official numbers yet, Jean, but we can measure the number of jobs at risk. For example, across Florida, Louisiana, Alabama, Mississippi, maybe even over to Texas—the states likely to be most affected and most directly affected—total employment in tourism industries and agriculture was about just over 2.5 million, which is about 14 percent of total employment in those states. But if we narrow that scope to just the areas along the Gulf coast of the most affected states where the spill looks to be headed, the numbers are much smaller, actually: just under 132,000, with most of those being in the accommodation and food services industries.
Now, I will add that there are multiplier effects involved here. For example, if we would see any impact on the energy industry, the amount of people that are involved in energy production and refining and transportation is significant, so all the way up the supply chain you could see employment being affected. But in the accommodation and food industries, the multiplier effects aren't as great. I don't want to downplay the impact on these areas, but right now it does seem to be a regional event.
Moderator: So, are there any national implications? Does the spill have the potential to impact the outlook for the entire U.S. economy?
Chriszt: So far we're very confident in saying that it is a regional event. The two sectors that we're watching closely with regard to national implications—and I mentioned one just a second ago—is energy, and the other is transportation or port activity. And today we've got no reports that activity in these sectors has been affected. But then again, I have to reiterate that this is an unfolding event. We're monitoring it closely through our business contacts, contacting public officials throughout the region and maintaining a view on all the data that we can get our hands on.
So overall, Jean, right now I think the best message to leave everybody with is that it's a potentially large economic impact on a regional level. There are some industries that are likely to be more affected than others, especially agriculture, or aquaculture, fishing industries, and the like, and tourism and recreation. But it's really difficult to say at this point what the overall economic impact is going to be because there are so many unanswered variables out there.
Moderator: Thanks for joining me, Mike.
Chriszt: It's been a pleasure, Jean. And let me just add one quick note: As I mentioned, we continue to track events as they unfold in the Gulf, and we have been posting blogs and other material on our Web site.
Moderator: Again, we've been listening to Atlanta Fed research team member Michael Chriszt provide insight into the oil spill in the Gulf. This concludes our Southeastern Economic Perspectives podcast. Thanks for listening, and please return for more podcasts. If you have comments, please send us e-mail at email@example.com.