The Gulf oil spill that is contaminating the waters off the coast of Louisiana could have an economic ripple effect extending to Florida and beyond, even if the slick doesn't cause extensive damage in those states.
Just the fear that the oil slick will reach the coasts of Alabama, Mississippi, Florida or beyond is already discouraging some tourists from planning trips to those areas and affecting the region’s fishing industry. Concern over oil damage potentially could even put a damper on coastal real estate markets, economists say.
“It’s very dramatic … as far as how bad this thing can get,” said Nathaniel Karp, chief U.S. economist with BBVA Compass, a regional bank based in Birmingham, Ala.
The oil spill is yet another piece of bad economic news for Southeastern states including Florida, which was already hard-hit by the recession and housing crisis along with freezing weather that punished the area’s agricultural industry this past winter.
“This is getting kicked when (you’re) down,” said Sean Snaith, director of the Institute For Economic Competitiveness at the University of Central Florida in Orlando.
The dark mass of oil is far from Florida now. But Snaith said just the image of the oil slick potentially drifting toward Florida’s beaches could be enough to cause some tourists to cancel plans for a Sunshine State vacation over worries about their health or the conditions on the beach.
“People make that association,” Snaith said. “They’re planning their holiday (and think), ‘Oh maybe we should go to Florida. Oh, oil spill.’”
Christina Johnson, a spokeswoman for the Florida Restaurant and Lodging Association, said the trade group has received anecdotal reports of hotel cancellations but probably won't have a definitive tally of the impact for several weeks.
Roots of disaster
The disaster began April 20 when an explosion and fire aboard a drilling rig off Louisiana’s coast caused the rig eventually to sink, killing 11 workers and opening an oil gusher from below the ocean floor. Oil and energy giant BP is working to contain the spill and mitigate its impact but so far has not been able to cap the leaks.
Meanwhile, the National Oceanic and Atmospheric Administration has already shut down a wide swath of commercial fishing area, even as other states wait to see how far the oil slick will spread and what kind of damage it will cause. Oceanographers are keeping a close eye on the Gulf Loop Current , which could push the oil slick as far as North Carolina under certain conditions.
In a worst-case scenario, the oil could cause billions of dollars in damage to property, wildlife, livelihoods and the seafood industry all along the southeastern edge of the United States and take several years to fully clean up. The problem is, nobody knows for certain whether the growing spill will cause such widespread harm.
Karp, the BBVA economist, said there are too many uncertainties to put a price tag on how much the oil spill could cost economies in the five-state region. He currently believes the spill will slow the region’s economic recovery but not stop it altogether.
“It’s not going to generate another recession, as of today,” he said. “If things remain relatively stable, then it would mean that the pace of the recovery is not going to be as fast as before.”
‘It’s just so slow’
For many who depend on the area for their livelihood, waiting to see what will happen to the giant sea of oil in the Gulf is excruciating.
“It’s just so slow. Every day you’re just sitting here wondering, ‘Is it going to happen? Is it going to come?’” said Jon W. Ritten, president of the Gulf Coast Association of Realtors in Mississippi.
The spill comes just as real estate agents are seeing sales activity pick up in both the primary and vacation home market, Ritten said. So far, concern about oil hasn’t had a serious impact, but area agents are fretting about whether it could.
“People are just real nervous,” he said.
Ritten thinks the damage would be primarily in the vacation home market, where people are more likely to be looking for waterfront homes and may be spooked by the prospect of an oil slick damaging the coast.
Further east, in Florida, the damage to key industries could worsen considerably if the oil slick does actually spread along the state’s coastline.
Snaith said restaurants in the region are already worried about getting enough fish and other seafood to serve patrons, and more widespread restrictions on fishing would make that problem worse. The fear of a seafood shortage also could push prices up.
In addition, the oil spill would have an impact on recreational boating, scuba diving and sightseeing, all key elements of the state’s important tourism industry. Florida visitors generated $65.2 billion in revenue in 2008, according to Visit Florida, the state's tourism marketing corporation.
Already, the state is bracing for those woes. Gov. Charlie Crist declared a state of emergency in 19 counties, and the state’s division of emergency management said it was preparing for potential impacts.
In the longer term, Snaith said the oil spill may delay or even kill a potential plan to expand offshore drilling in the Gulf. That’s good news for environmentalists who opposed the idea but bad news for those who were looking at drilling to provide an economic boost and bring in needed tax revenues.
Amid the uncertainty about the extent of the oil slick’s damage, Snaith likened the oil disaster to something Florida residents are much more familiar with: hurricanes.
“Right now it’s kind of like a hurricane spinning offshore, but it’s not clear how and where and to what extent it’s going to have an effect,” he said.
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