News Analysis: BP spill batters bits and pieces of U.S. economy

08:33, June 12, 2010      

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Although the BP oil spill is not expected to impact the larger U.S. economy, it is hurting local and regional economies, experts said. But the economic damage could increase as the spill moves toward Florida and possibly beyond.

"I don't think the spill will have a huge impact on the overall U.S. economy. (But) clearly there are portions of states all along the Gulf coast, from Texas to Florida, who will be affected," said William A. Galston, senior fellow at the Brookings Institution think tank.

Joshua Freed, director of the clean energy program at Third Way think tank, said that while the political consequences will impact Washington, only those states who find their waters clouded with oil will be affected.

But the question is how far the oil will reach, as scientists fret it could spread as far north as the Carolinas and even further, he noted.

The ruptured oil well off Louisiana's coast is in its seventh week of gushing shiploads of crude into the ocean at an estimated 500,000 to one million gallons daily. Florida is beginning to see crude wash up on its shores and the state is bracing for the economic impacts. Economists estimated that Florida could lose as many as 195,000 jobs and almost 11 billion dollars from oil reaching its shores.

Gulf coast residents, politicians and the oil industry say Obama's six-month extension of the moratorium on coastal drilling is costing jobs in this worst recession since the 1930s.

Louisiana Governor Bobby Jindal penned a recent letter to Obama saying the moratorium could cost his state up to 20,000 jobs over the next 12 to 18 months. And on Thursday Louisiana Sen. Mary Landrieu appeared on ABC's "Good Morning America" calling for an end to the ban, saying it will harm the local economy.

But some dispute such claims.

Dean Baker, co-director of the Center for Economic and Policy Research think tank, said coastal drilling accounts for only a marginal number of jobs, in spite of what he called the oil industry's touting of its economic benefits. "You could make other arguments in favor of drilling, but the jobs involved are really trivial," he said.

Ben Lieberman, senior policy analyst at the Heritage Foundation think tank, said the region will feel the double whammy of direct economic damage and the moratorium he said is putting people out of work.

And while the cleanup operation is creating some jobs, such projects are of the make-work variety and unlikely to grow the economy, he said.

While the extent of the environmental damage remains unknown, experts fret the spill could damage ecosystems, marshes and wildlife.

Oil has already started creeping into marshlands -- habitats for many birds that are also important to the area's most commercially valuable fisheries -- and it is seeping into roots and killing reeds. While the area marks only a small portion of the surrounding vegetation, the oil is difficult to clean up, experts said.

Six hundred animal species are at risk, according to the Louisiana Department of Wildlife and Fisheries, including more than 400 fish species and 100 kinds of birds.

Scientists and officials said the spill could exceed the damage caused by the 1989 Exxon Valdez accident that leaked an estimated 10.8 million U.S. gallons on to the shores of Alaska.



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