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In Florida, oil adds to economic woes

The news that oil spewing from the Gulf Coast had likely reached Florida’s famous beaches isn’t just an environmental disaster — it’s also a potentially devastating economic blow.
Image: Gulf Oil Spill Spreads, Damaging Economies, Nature, And Way Of Life
Protesters mix with beachgoers Sunday on Pensacola Beach where oil globs have come ashore.Joe Raedle / Getty Images

News that oily tar balls are washing ashore on Florida’s famed, white sandy beaches is more than just an environmental disaster — it’s also a potentially devastating economic blow to an already struggling state.

“The timing couldn’t be more unfortunate,” said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.

Even before the BP rig disaster began spewing oil into the Gulf of Mexico in April, tourism-dependent Florida was struggling to dig out from a recession that hit the state early and hard. Now the oil spill’s possible impact on everything from hotel bookings to condo sales could pull the state into a deeper and longer-lasting economic funk.

“It’s going to ripple throughout Florida’s economy and the question is, ‘How big is it going to be?’” Snaith said.

The Sunshine State’s unemployment rate stood at 12 percent in April, well above the national average. Even before the oil disaster, Snaith was predicting that it could take years to get below 10 percent as Florida and the nation deal with anemic job growth.

Foreclosure activity in Florida, a troubling aftershock of the state's busted housing boom, remains among the highest in the nation, according to RealtyTrac. Recent signs that the real estate market is stabilizing could be undone if oil contamination has an effect on beachfront condo sales or other real estate activity, Snaith said.

‘Tourism is what put Florida on the map’
Tourism is Florida's most prominent industry, accounting for about 6 percent of the state’s economic output, or $42.3 billion in annual business, according to the Bureau of Economic Analysis. It’s even more important to employment, with leisure and hospitality jobs accounting for about 900,000 of the state’s 7.3 million workers, according to Snaith’s estimates.

“Tourism is what put Florida on the map, absolutely, and it will always be a major economic driver,” said Deborah Breiter, chair of the department of tourism events and attractions at the University of Central Florida.

Tourism’s impact goes beyond its direct contribution to the economy, affecting everyone from gas station attendants who fill up rental cars to dry cleaners who clean hotel workers’ uniforms.

“We are intimately entwined in the economy of the whole state,” Breiter said. “As goes tourism, so goes the state of Florida.”

Tourists visiting Florida spent about $60 billion last year and generated 21 percent of the state’s sales tax revenues, said Kathy Torian of Visit Florida, the state’s tourism marketing corporation.

The state’s particularly strong reliance on tourism, combined with its sheer size and hundreds of miles of beaches, means that the oil spill itself is likely to have an outsized impact when compared to other states that have been contaminated with oil, such as Alabama or Mississippi.

Key part of state’s identity
Beyond just economics, tourism has always had a particular historical and cultural significance for the state of 18.5 million. Breiter jokes that the state’s tourism industry dates to the 1500s, when legend has it that explorer Juan Ponce de Leon discovered Florida while searching for the fountain of youth.

Even before the oil disaster hit, Florida had been suffering from a drop in tourism as a result of the recession and other factors. The number of visitors to Florida last year fell by less than 1 percent, to 80.3 million, after a 2.3 percent decrease in 2008, according to Visit Florida.

“Leisure and tourism were already on pretty wobbly legs, and we were forecasting that the recovery there was to be somewhat weak, even before the oil spill,” Snaith said.

It is not yet clear just how seriously the oil disaster will hurt Florida. Gobs of oil have been seen on beaches in the Florida Panhandle, but no one knows for sure when or if the oil catastrophe will spread further along the state's coast. The extent of the damage could depend on whether BP can slow or stop the flow of oil that is spewing from a drilling rig that exploded off the coast of Louisiana in late April.

On Sunday, Florida Gov. Charlie Crist and singer Jimmy Buffett — who plans to open the Margaritaville Hotel in Pensacola this week — spent about an hour on the beach, chatting and doing interviews. Buffett told The Associated Press he had no plans to delay the hotel opening, adding, "This will pass."

BP said Monday the cost of cleaning up the spill has reached $1.25 billion while the government warned that the fight to contain the oil could last into the fall.

Snaith, the economist, said the biggest worry would be if the oil spill leaves the Gulf of Mexico and begins to taint the state's Atlantic Coast beaches, which some scientists believe is possible.

“This is sort of a doomsday scenario,” he said.

It’s also unclear how big of a ripple effect the oil spill will have on other Florida industries, such as fishing, or on longer-term economic issues such as plans to begin drilling activity off the state's coast.

BP aid
So far, the state of Florida has received $50 million from BP for cleanup and tourism marketing efforts, and the company has committed another $8 million for water testing.

Late last week, Crist asked BP to provide an additional $50 million to cover costs associated with the spill and cleanup. Separately, Crist also asked the state to set aside $100 million of its $500 million budget for cleanup research and planning for Florida universities.

As of Friday the state had not yet heard back from BP about those requests, said Chris Cate, a spokesman for the governor’s office. BP did not return a call from seeking comment.

Although the money would help, Cate said it would only mitigate the economic blow from the disaster.

Snaith said any funding from BP would pale in comparison to the state’s costs. And he said BP could not possibly reimburse everyone who has been affected.

“It’s sort of a Band-Aid on a deep and persistent bleeding laceration,” he said of BP’s aid.

If there is any silver lining, it is that the state has had to deal with environmental disasters that spooked tourists before, such as major hurricanes. Breiter said that experience has taught tourism and government officials how to respond quickly and aggressively.

“I think that we have learned from our past disasters,” she said.