Spring Semester 2010
“Every area in the country is subject to some kind of disaster - flood, hurricane, earthquake, to name a few. Even man-made disasters - oil spill, civil unrest, fire - can devastate the surrounding neighborhood and economy. Even though an area has never been damaged before, there is no guarantee that it will not happen tomorrow.” ~Carol Chastang
Oil spills not only affect the world environmentally but also economically. The economic impacts are directly or indirectly related to the environmental impacts of oil spills. But, the economic impacts of oil spills are not much talked about as the environmental impacts are. Gasoline prices in the United States for citizens at some point in our recent history have been up to almost five dollars per gallon. The change in gas prices may bring about a change in the risks people are willing to take both on the stock market and in their day-to-day spending. Still, there are people who claim that the current oil prices are not yet close to impacting the United States’ economy, while there are those who promise there will eventually be noticeable strain. This paper will discuss the economic effects of both oil spills and fluctuating gas prices in the United States.
On April 20, 2010 an explosion occurred aboard the Deepwater Horizon, an off shore BP oil rig about 52 miles southeast of Venice, LA. This explosion caused the deaths of 11 platform workers and injuries of 17 others. In addition a massive ongoing oil spill that is estimated to have released about 20,000 to 40,000 barrels of oil per day in the Gulf Coasts waters. The exact spill flow rate is uncertain – in part because BP has refused to allow independent scientists to perform accurate measurements – and is a matter of ongoing debate. The resulting oil slick covers a surface area of at least 2,500 square miles (6,500 km2), with the exact size and location of the slick fluctuating from day to day depending on weather conditions. Scientists have also reported immense underwater plumes of oil not visible at the surface. Experts fear that the spill will result in an environmental disaster, with extensive impact already on marine and wildlife habitats. The spill has also damaged the Gulf of Mexico fishing and tourism industries. There have been a variety of ongoing efforts to stem the flow of oil at the wellhead. Crews have been working to protect hundreds of miles of beaches, wetlands and estuaries along the northern Gulf coast, using skimmer ships, floating containment booms, anchored barriers, and sand-filled barricades along shorelines. The U.S. Government has named BP as the responsible party in the incident, and officials have said the company will be held accountable for all cleanup costs resulting from the oil spill. (CNN, 2010) It will be a while before the full economic impact of this particular oil spill is measured; however the spill as estimated is having effects on many different industries. (See Chart, page 6) Generally speaking, the most direct economic impact of oil spills is the loss of oil. The losses incurred depend on the size of the spill; the bigger the spill, the higher the economic impact. Oil spill cleanup costs too increase with the size of the spill.
Most of the people along coastal areas depend on tourism for income. The restrictions imposed on recreational activities, such as diving, bathing, and boating in the polluted area affect tourism. As a result, they suffer huge economic losses. Until and unless oil spill cleanup is done, these continue to suffer. Fishing industry is another prominent sector that bears the brunt of oil spills. Contamination or death of commercial marine animals and plants result in economic loss for the fishermen. Oil spill cleanup actions usually take a very long time. The fishing and shellfish area are closed during these periods. This...