Spill may cost Gulf Coast $22.7 billion in tourism, study estimates
The BP oil spill in the Gulf of Mexico may cost the region up to $22.7 billion in lost tourism spending alone, a new study released Thursday shows.
Also Thursday, another study raised concerns that new oil spill-related regulations under discussion in Washington could be a severe burden on small oil companies, costing thousands of jobs and lowering government tax revenue.
The tourism study, conducted by consulting firm Oxford Economics USA and commissioned by the U.S. Travel Assn., estimated the loss in travel spending by comparing the spill with 25 recent natural and man-made disasters, including the 1989 Exxon Valdez spill in Alaska and last year’s H1N1 (swine flu) outbreak.
Travel and tourism generates up to $34 billion in direct spending and employs 400,000 people in coastal communities in Texas, Louisiana, Mississippi, Alabama and Florida.
But public perception about the spill could cost the region between $7.6 billion and $22.7 billion over the next three years, according to the study.
“Tourism is integral to the economy of the Gulf Coast,” said Adam Sacks, managing director of Oxford Economics USA.
To counter misperceptions about the damage caused by the spill, the travel group recommends that the federal government collect $500 million from BP to pay for a marketing campaign. Oxford Economics estimated that such a campaign could reduce the losses by $7.5 billion.
“Facts often take a back seat to fear and perception,” said Roger Dow, president of the travel group.
The biggest loss in travel spending would be felt in Florida, where visitors spend more than $22 billion a year, according to the study. The study estimates that Florida can lose $18.6 billion in travel spending over the next three years even though 90% of the state’s beaches remain untouched by the disaster.
BP has already funded a $25-million campaign to boost tourism for Florida.
Meanwhile, the study on the costs of new regulations looked at the possible economic consequences if Congress sets new regulatory and liability limits so high that many smaller independent oil companies couldn’t afford them.
The study by the business research and consulting firm HIS Global Insight said that 300,000 jobs and $147 billion in federal, state, and local taxes would be lost over the next 10 years if only the major oil companies such as Exxon Mobil, Conoco Phillips and Chevron could afford to operate in the gulf.
The independent companies are the largest shareholders in two-thirds of the more than 7,500 oil leases in the gulf, and in 81% of the leases that are already producing oil.
The report comes as Congress is expected to introduce legislation as soon as next week to raise the liability cap on economic damages from $75 million to a much higher level. One proposal might eliminate the cap altogether.
“There have been proposals in the Congress that would set a threshold so high” in terms of a company’s financial ability to respond to a spill the size of the BP disaster “that only major oil companies would be able to meet,” said Sam Gillespie, executive vice-president of Cobalt International Energy, a 5-year-old Houston based oil exploration company.
“There have been voiced views,” he added, “that the only people who ought to be drilling in the deepwater are the major oil companies.” Gillespie’s company commissioned the HIS Global Insight report.