The numbers being batted around when it comes to how much the oil spill will ultimately cost BP and the local Gulf of Mexico economies are huge. $3 billion. $14 billion. One politician put it at over $100 billion.
The range is so big because two important questions remain unanswered: When will the leak be sealed, and will most of the oil wash ashore? Until those are answered no one will know the pricetag of the damages for sure.
But there have been studies done looking at what’s broadly at stake, and the number is quite large indeed.
The four biggest industries in the Gulf of Mexico are oil, tourism, fishing and shipping, and they account for some $234 billion in economic activity each year, according to a 2007 study done by regional scholars and published by Texas A&M University Press.
Two thirds of that amount is in the United States, with the other third in Mexico.
If the Gulf of Mexico were a country, it would be the 29th largest economy in the world.
Oil and gas
Ironically, the largest chunk of that money is generated by the oil and gas industry, and they may ultimately be the ones that lose the most.
Oil and gas interests generate $124 billion or 53% of the total money, according to Jim Cato, a former economics professor at the University of Florida and one of the authors on the study.
As of Thursday, all new offshore drilling in U.S. waters in the Gulf remained closed following the sinking of the Deepwater Horizon oil rig last month, which claimed 11 lives and left an uncapped oil well leaking thousands of gallons a day into the water.
Oil production from existing wells has been largely unaffected and drillers have been busying themselves with wells begun before the explosion. But the longer the ban remains intact, the harder the economic bite.
"If the moratorium is continued through June, lost revenue from shallow water drilling is estimated at $135 million," said a letter Friday from ten senators urging a lifting of the ban.
The ban may eventually be lifted, but how much more the oil industry will have to pay for royalties or spill prevention, plus restricted access to new drilling sites, remains to be seen.
Tourism is the second largest industry in the Gulf, and it ranks right behind oil. About 46% of the Gulf economy, or over $100 billion a year, is from tourism dollars, according to the A&M report.
With tourism, it’s not necessarily the oil that washes up on the beach that hurts the industry, but how much oil people think will wash up on the beach. And people seem to think it will be bad.
In Florida, state tourism officials recently told CNN they’re getting cancellations as far as three months out.
In Mississippi it’s even worse.
Ken Montana, President of the Mississippi Gulf Coast Tourism Commission, said cancellation rates are running at nearly 50%.
"The perception is that everybody has oil on the beach and we are all closed up," Montana told CNN. "No beaches are closed, period."
Fishing and shipping
Fishermen are perhaps the most directly impacted by the spill. The government has already closed over 20% of federal waters for fishing activities and many of them are out of work.
But commercial fishing and shipping together only account for 1% of the Gulf’s total economic activity.
While the number is small in terms of Gulf cost dollars, it does not factor in the impact a shut down in shipping could have, which could halt grain and other cargo from traveling up and down the Mississippi River.
According to the Port of New Orleans, no disruption in shipping is foreseen. The Coast Guard has set up five washing stations for ships to get scrubbed if they come into contact with the oil, but so far none have been used, said a port spokesman.
What’s at stake
Obviously, the oil spill isn’t going to shut down the Gulf’s entire economic output.
When the spill first happened, researchers at the Harte Research Institute for Gulf of Mexico Studies, who also contributed to the A&M report, estimated the economic damages might be $1.6 billion. That number included $400 million in direct economic costs, and another $1.2 million in services provided by wetlands that might be compromised - things like water filtration and such.
But that number was arrived at when the oil spill was estimated to be 1,000 barrels a day, said David Yoskowitz, chair of socio-economics at Harte.
BP (BP) estimates for the oil leak are now 5,000 barrels a day, and some say it could be 10 times that.
Moreover, both the Harte study and the A&M report only look at the Gulf of Mexico. Yet there are reports that the oil is getting caught up in the so-called loop current, which could bring it up the eastern seaboard.
"If that happens, all bets are off," said Yoskowitz.