The BP Oil Disaster Might Help the Economy, but Does That Matter?

Gulf oil spill cleanup workers

The Gulf of Mexico oil disaster may, believe it or not, give a boost to our ailing economy. Because while the six-month moratorium on new offshore drilling and the negative impacts on fishing and tourism in the Gulf will undoubtedly put a damper on the GDP, the temporary industry of cleanup workers could offset any losses—and perhaps even outweigh them. Does it matter?

The Wall Street Journal reports:

The six-month moratorium on deep-water drilling may cut U.S. oil production by around 3% in 2011 and cost more than 3,000 jobs, according to J.P. Morgan’s energy analysts. Commercial fishing in the Gulf is also likely to suffer, but that’s only about 0.005% of U.S. GDP. The impact on tourism is the hardest to measure, although it’s fair to expect that many hotel workers who lose their jobs will find it hard to get new ones. Still, cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said. The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion.

So kudos to the cleanup workers making the big bucks, right? Not exactly. These workers, many of whom are fishermen without anything to fish, won't have jobs anymore once the cleanup operation is finished. And while completely cleaning up this mess will take years, the Gulf Coast won't need an army of 4,000 people three or four years down the line. As hard as it is to imagine at this point, the spill won't last forever. But as The Washington Independent asks, "How long until you would want to swim on one of those beaches, or eat one of those oysters?"

We need only take a look at the last major oil disaster in the United States to see the inadequacies of the GDP as an accurate economic indicator. The 1989 Exxon Valdez oil spill raised the GDP by $2 billion thanks to intensive cleanup operations—but this doesn't take into account the long-term environmental damage in Alaska, which can still be seen today.

The Gulf Coast has even more of a fishing and tourism-reliant economy than the areas affected by the Exxon Valdez. So take reports touting the economic benefits of the BP disaster with a huge grain of salt—any positive effects are only temporary.

Read more about the Gulf Oil Spill

Got information on the spill you want to share? Email us at oil@fastcompany.com. It'll go directly to the lead reporter and editor on these stories, and they'll assume all initial communication to be strictly confidential.

Ariel Schwartz can be reached on Twitter or by email.

Add New Comment

3 Comments

  • XSportSeeker

    Which is why BP should be sold and all it's assets seized to compensate for all the damage they will provoke on short, medium and long therm.
    Lots of people will have short therm jobs from which they'll take nothing really useful (other than money, and of course the feeling they are helping humanity fix it's own mess), and could potentially even damage their healths. The only way to keep them on the job is by having another spill, which we REAAALLY don't want.

  • Scott Theisen

    Ariel, you and the financial "geniuses" at JPMorgan should take a minute to brush up on economic theory. This idea that destruction creates wealth is a fallacy, disproven by Bastiat nearly 200 years ago.

    He called it the "Broken Window Fallacy", as any resources required to repair a situation was merely resources that could have been allocated elsewhere. There is no gain. No benefit. In fact, the loss of product, cash, and taxpayer monies that will fund this reconstruction represent a setback, and not a step forward.

    Check it out. Hazlitt (from Bastiat) is a rockstar. "destroying resources makes societies poorer, not richer." http://mises.org/daily/3044

  • scott griffis

    Agreed any help from cleanup will not be enough to make up for this. The only real good thing that may come is a shift in policy that pushes for new energy technologies but even that has yet to happen.

    ----
    http://www.cubecheck.com