Economic Effects of the Deepwater Horizon Oil Spill

1. Economic Effects of the Deepwater Horizon Oil Spill Brian Richard Dept. of Economic and Workforce Development

2. Mississippi Gulf Coast • Importance of the Gulf of Mexico to the Mississippi Gulf Coast economy • Tourism • Fisheries • Impacts of the Oil Spill

3. Tourism Related Employment Source: EMSI Complete Employment – 4th Quarter 2010

4. Gulf Coast Tourism Trends Source: EMSI Complete Employment – 4th Quarter 2010

5. Gaming Revenue Source: Mississippi State Department of Revenue

6. Fishing and Seafood Source: EMSI Complete Employment – 4th Quarter 2010

7. Economic Impacts Source: BusinessDictionary.com Economic Impact: the economy-wide effect on employment and incomes produced by a policy, event, or decision Fiscal Impact: the effect on tax revenues produced by a policy, event, or decision

8. Economic Impacts We know (and will continue to track) some of what happened in the economy with the oil spill The research is estimating what would have happened without the oil spill The difference between what did happen and what would have happened is the economic impact

9. Economic Impact

10. Economic Impacts • Challenges • How are the effects of the oil spill isolated from everything else going on in the economy? • Katrina recovery • Recession/recovery

11. Hospitality and Tourism • Mississippi Visitors • Casino Gamers are the largest market (about 40 %). • ‘Soft adventurers’—bird watch, camp, fish, interest in nature/ wildlife.  Comprise about 7 % of the visitors. Source: Mississippi Development Authority Tourism Division/TNS

12. Hospitality Employment Source: EMSI Complete Employment – 4th Quarter 2010

13. GC Gaming Revenue Growth Source: Mississippi State Department of Revenue

14. Hotel Tax Revenue Growth Source: Mississippi State Department of Revenue

15. Hotel Revenue Growth Source: Smith Travel Research

16. Restaurant Tax Revenue Growth Nonalcoholic Restaurants Source: Mississippi State Department of Revenue

17. Restaurant Tax Revenue Growth Alcoholic Restaurants Source: Mississippi State Department of Revenue

18. City Tax Collections Source: Mississippi State Department of Revenue

19. Fisheries Employment Source: EMSI Complete Employment – 4th Quarter 2010

20. Fisheries Percent of MS waters closed to fishing Source: Dr. Ben Posadas, MSU Coastal Research & Extension Center

21. Fisheries – Shrimp Landings Source: NOAA/Dr. Ben Posadas, MSU Coastal Research & Extension Center

22. Decoding the Trends

23. Decoding the Trends: Anecdotal Evidence • Ship Island ferry down 60% over a May weekend (“Oil Spill Hurting Miss. Gulf Coast Tourism” WAPT.com, May 10) • A Biloxi charter boat captain said customers booked 26 trips with him in May 2008 and 26 in May 2009, but only 11 this May. He said his numbers for June were similar. (“Geography protects Mississippi from worst of the oil spill, but tourism still hobbled”, AP June 15th)

24. Decoding the Trends: Anecdotal Evidence • BP has spent $350 million on cleanup, which has barely begun, and hired 13,800 people across the Gulf states to enlist in the effort. (“Shrimpers, fishermen, hotels feel oil spill's trickledown effect.”, USA Today, May 13) • Of the 5,700 people contracted to work on the Mississippi response effort, about 4,700 are natives of the state. (“Employing Mississippians makes the difference”, Mississippi Gulf Response (BP), June 21st)

25. Decoding the Trends • Current/future survey work • Sector specific • Chain hotels vs. locally owned hotels • Tourism attractions • Seafood harvesters • Seafood processors

26. Decoding the Trends • Future survey work – looking forward • National attitude surveys • Seafood safety/desirability • Tourism • Soft adventurers (fishing, bird watching, etc.) may be less inclined to come to the Gulf Coast • Did Gulf Coast tourism customers find other regions to visit?

27. Decoding the Trends • Fisheries – looking forward • Oysters/shrimp • Mature oysters and shrimp are fairly resistant to toxic effects • But, they can accumulate toxins making them a potential health hazard • Eggs and larvae are more susceptible • This leaves the possibility that the current years harvest will show little effect but there will be lower populations over the next 2-3 years

28. Decoding the Trends • Fisheries – looking forward • Finfish • Mature finfish can swim away from the hazard • This may cause a geographic shift in the harvest • Evidence from previous oil spills suggests that the finfish abundance will return relatively quickly

29. Decoding the Trends • Quasi-experimental matching • Finding ‘control’ locations without oil and comparing trends • Biloxi vs. Tunica gaming • MS Gulf Coast vs. Myrtle Beach tourism • MS Gulf Coast vs. Charleston fisheries

30. Modeling the Impacts • Static (input-output) models • Estimate the change in economic activity resulting from the change in final demand for a product/service (or group of products/services) • Inter-industry transactions • Household-industry transactions • Multiplier effect • Estimates the statewide impacts of a regional event • IMPLAN, EMSI, RIMS II

31. Modeling the Impacts • Dynamic models • Builds upon input-output model allowing for changes in price levels, labor mobility, etc. • Estimates the statewide impacts of a regional event • In addition to changes in final demand, inputs to the model might include changes in prices, wage rates, imports, exports, etc. • Projects impacts into the future • REMI

32. Economic Effects of the Deepwater Horizon Oil Spill Discussion/Questions