May 29, 2010

Weighing Oil vs The Environment

In a very moving statement this week, Congressman Charlie Melancon talked about the importance of the wetlands of Louisiana to the US economy:

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It would certainly seem that the wetlands should be valued, but this is how I've seen it described in an investment bank blog:

“Much has been made about the impact on the seafood industry. This is not politically correct of me, but seafood is really a minor player in most of these coastal economies. Louisiana is #2 in the nation in fisheries (second to Alaska). However, the landed value of our fisheries in 2008 was: shrimp - $130.6 mm, crab - $32 mm, oysters - $38.8 mm, and menhaden - $45.8 mm. That's about $247.2 mm in total. I did a study on the value of recreational saltwater fishing in Louisiana about 3 years ago. Including both direct and indirect effects, it created about $528 mm in business sales in the state. It is also important to note that much of this work is not full-time. It only occurs during "seasons," and in the case of oysters, many people come in from out of country to harvest their beds. All these numbers pale compared to the impact of the oil and gas industry. Those supply boats and platforms are operating 24/7 and involve much higher wages than fishing. We are talking about billions here.

“I also keep up with some of the coastal MSAs from Mississippi to the FL panhandle for a group of banks. I really do not think the slick will impact the Mississippi tourism business much at all. People do not go to the Mississippi coastal area to get in the water. The sand is not as white and the water is not as clear, because it is so close to the mouth of the Mississippi River, so there is still a silt effect there. People come to the Mississippi Coast for the casinos, primarily. Unless there is some ‘odor’ effect as the slick comes ashore, that state should not be hurt all that much.

“Once you get to the eastern side of Mobile Bay, the whole equation changes radically. That is where the beaches are beautifully white and the water is clear. People come there to get in the water. For most of these communities their entire economy is based on tourism and the military. Just the prospect of the slick coming onshore is hurting bookings from Gulf Shores, Alabama to all along the western coast of Florida. The good news is that this should be a short-run problem. Sandy beaches can be cleaned up. New sand can be brought in. If this thing goes to the West---where Louisiana has no sandy, or even identifiable coast---and gets into Louisiana's marshes, that is another more difficult cleanup altogether.

“Finally, a comment about the size of the spill. There is a great deal of uncertainty about how big it is. The number being repeated is 5,000 barrels or 210,000 gallons. This seems like a huge number. However, envision a relatively shallow, Olympic-sized swimming pool like you saw during the Summer Olympics. That pool contains 660,000 gallons of water. The Gulf is huge. That many gallons being spilled is not horrific. Why is the slick so large? Answer: because it is only about a millimeter thick. I am not pointing this out to minimize the size of this problem. It is a legitimate catastrophe, but we still need to keep things in perspective.”

Obviously, the wealth created by oil (a non-renewable resource that is destroying our planet) is more important than the environmental services the Gulf provides and the livelihood of those who depend on the Gulf for its life, nevermind the impact to the birds, the fish and other natural life that hasn't provided massive wealth to a few select humans.

That is the market talking.

[Please note that the quote above did not come from the proprietor of Cumberland Advisors, but was the opinion of another investment advisor who wrote in to comment on the series about what this means for BP. Here is Cumberland Advisors' assessment:

We watch; we wait; we hope. But in our gut we know that the unfolding drama in the Gulf of Mexico is destined to become the largest and most costly oil pollution event in global history. We reiterate our recommendation to avoid investment in BP shares or related companies. Their liabilities grow every day.

He knows the situation is very bad.]

Posted by Mary at May 29, 2010 10:08 PM | Environment | Technorati links |
Comments

That's not the market talking; that's the short-sighted pirates of the market talking. The fisheries will be affected for decades by this disaster. Totaling up one year of the worth of those fisheries doesn't begin to address how much of an impact this spill will have. This critic is the same sort who has been ruining our economy for years - don't worry, all those manufacturing jobs will be replaced by clean service industry jobs; don't worry about that housing bubble, all those innovative debt "instruments" will make our economy grow again. That these people even have a forum to peddle their nonsense in just goes to show how perverse our political discourse has become.

Posted by: Cujo359 at May 30, 2010 10:32 AM

Nationalize Deepwater Horizon.

Any proceeds from Deepwater Horizon, whether spilled oil captured or oil extracted from the reservoir DH is tapping, should primarily go to Gulf Coast residents, workers and business owners, who are getting hammered by this man-made disaster, and no other oil company can tap into this 22,000-foot-deep oil reservoir, trying to do an end-run.

Affected states and the federal government can receive a percentage of the DH oil proceeds, but only to cover state and federal expenses in dealing with this catastrophe.

BP has already pocketed $275 million in insurance coverage. They should not be allowed to profit anymore from a disaster that they caused. Not a single red, blood-soaked, oil-soaked dime.

The model for this can be based on what Alaskans have in place already, with a few modifications, that is, the nationalization of a single oil well. Alaskans receive oil royalty checks each year from the Alaskan government, in which they, the citizens, benefit from all the oil activity in Alaska. We need a similar set-up for Gulf Coast residents and states affected by BP's Deepwater Horizon disaster, with no questions asked, no bureaucratic roadblocks put in place, all one has to do is prove that one is a resident, worker or business owner in any of the affected states.

Posted by: The Oracle at May 31, 2010 08:22 PM

This critic is the same sort who has been ruining our economy for years - don't worry, all those manufacturing jobs will be replaced by clean service industry jobs; don't worry about that housing bubble, all those innovative debt "instruments" will make our economy grow again.

I agree that we need a similar set-up for Gulf Coast residents and states affected by BP's Deepwater Horizon disaster, with no questions asked, no bureaucratic roadblocks put in place, all one has to do is prove that one is a resident, worker or business owner in any of the affected states.

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Posted by: John C Homes at June 2, 2010 02:22 AM

This is such a huge disaster for all involved: For the families of the 11 workers who were killed, to the environment, to people whose livelihoods depend on vacationers who visit. I just hope people will support the local businesses in the Gulf Coast region and vacation there anyway.

Posted by: lfktravelguru at June 2, 2010 12:34 PM

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8-)Yah, theres a lot of oil trending in the Gulf of Mexico. The people living in proximity can be called (oil) rigged heads, and, dont forget, if they wash in the ocean, they dont become whiter.

Posted by: ccokz at June 4, 2010 02:28 AM

I agree that we need a similar set-up for Gulf Coast residents and states affected by BP's Deepwater Horizon disaster. What Alaskans have in place already, with a few modifications, that is, the nationalization of a single oil well. Alaskans receive oil royalty checks each year from the Alaskan government thanks.

Posted by: student aid at June 4, 2010 02:28 PM