The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
A regional event, for now
In the short term, the Gulf oil spill has largely been a regional economic event. Gulf area aquaculture and tourism businesses have been affected, but for the spill to have national implications, the energy and transportation sectors would have to be interrupted. So far, energy production has not been disrupted and shipping facilities remain open and are operating normally.
Any interruption in oil production, imports or both would have a significant impact on supply. According to the U.S. Department of Energy, Louisiana produces 1.4 million barrels per day of crude oil (2010 average to date), accounting for 27 percent of all U.S. crude oil production. Each day, 6.1 million barrels of crude oil and petroleum products (2010 average to date) enter the country through the Gulf Coast, accounting for 48 percent of all U.S. crude and petroleum product imports.
An extension of the moratorium on new deepwater drilling has not affected prices. However, David Kotok of Cumberland Advisors pointed out in Part 6 of his "Oil Slickonomics" commentary that the longer-term implications of the oil spill hold important price influences.
"Our expectation is that the oil business is about to enter a period of intense scrutiny and regulation worldwide. It will confront higher cost structures and much more inspection and regulation. This will eventually be reflected in higher oil prices."
According to data from the Port of New Orleans, the Mississippi River remains open to maritime traffic, and no ship calls have been canceled because of the spill. Port statistics show that about 500 million tons of cargo passes through the Mississippi each year, and more than 6,000 ocean vessels annually move through New Orleans on the Mississippi River. Any disruption to these facilities would have an impact beyond the port as the flow of goods reaches well beyond Louisiana.
Of course, the longer the spill goes unabated, the greater the chances that the oil production and imports could be affected and port activity could be influenced. The opportunity for the oil slick to spread throughout the Gulf also increases daily, as do the chances that it may move out of the Gulf and up the East Coast. In terms of the geography affected by such events, the regional nature of the Gulf oil spill will become more national in proportion.
By Michael Chriszt, assistant vice president in the Atlanta Fed’s research department
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The Gulf oil spill and northwest Florida
Several universities in the region have shared their thoughts and ideas concerning the economic impact of the Gulf oil spill. As members of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN), these experts provide valuable insight into local economic conditions. This week's SouthPoint highlights one such contributor, Dr. Rick Harper, director of the Haas Center for Business Research and Economic Development at the University of West Florida.
In addition to the direct negative economic impacts resulting from the spill on sectors such as tourism and commercial fishing, Dr. Harper notes in a recent report that
"It will also be seen in diminished asset values that reflect expected future lost profitability due to the damage to their income-producing potential. Above and beyond these market transactions, it will be seen in lost well-being of residents, visitors, and others who value our natural assets."
Measuring the direct impact on tourism is complicated by the fact that the Gulf Coast is largely a "drive-to" destination and that many vacationers do not plan their trips far in advance. As a result, Harper contends that
"[F]ears that the oil spill may reach our [northwest Florida] shores this spring or summer is clearly causing visitors to change their summer vacation plans. For potential visitors, alternative vacation destinations or activities instead of a Florida Gulf Coast beach vacation become much more attractive once the risk of encountering the ongoing oil spill is factored in."
Much of the focus on the spill's impact on the tourism sector has focused on 2010. But Dr. Harper points out that not only is the current season in jeopardy, but there are possible implications beyond this year.
"Under the best-case scenario, in which the spill is completely stopped and it never reaches our shores, this negative impact to the Florida visitor industry may be largely limited to the 2010 summer season. If the spill does reach our shores, affected areas are likely to suffer longer-lived damage to one of our most valuable income-generating assets—the Florida brand image of pristine beaches, beautiful marshes, and abundant fish and wildlife."
Harper's conclusion recognizes the fact that the economic impact of the oil spill on Florida cannot yet be calculated with precision.
"However, the effect will be substantial, even if the spill never reaches our shores, because of the important role that perceptions play in planning and decision-making for our customers. The effects will be seen first in our visitor industry, including all of the businesses that rely on visitor spending in the key summer season. Those effects will have collateral damage as they ripple through the economy. Changes in asset values will be more severe if the perceptions of risk and damage are more pronounced and non-market valuations of environmental amenities will also suffer. The fiscal impact to local and state government will be seen in reduced revenue and increased spending. These effects will only become larger should a hurricane or tropical storm exacerbate the potential for damage. The more quickly the oil flow can be completely stopped, and the spill contained, the less the damage will be."
By Michael Chriszt, assistant vice president in the Atlanta Fed's research department
May 26, 2010 in Energy, Florida, Local Economic Analysis and Research Network (LEARN), Oil | Permalink
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There's a lot to LEARN
When the Atlanta Fed set out to improve its understanding of the Southeast economy, one thing that became immediately apparent was that we could not hope to field a staff of experts on every area in the region. Clearly, there are vast differences between the economies of south Florida and north Georgia, between east Tennessee and west Mississippi. And New Orleans, well, that's a world unto itself! So we set out to find experts on local economic conditions, and we found a bunch. Most are located in university-based business and economic research centers, and a list can be found on our Web site.
Many of these centers are also part of the Association for University Business and Economic Research (AUBER), which is the professional association of business and economic research organizations in public and private universities.
We called our network "LEARN," which stands for Local Economic Analysis and Research Network. Our goal was not to establish a formal organization, but an informal network of local economic experts throughout the region. We held a conference in September 2008 in New Orleans and will meet again in 2010. The real benefit of these relationships is the information we gather on local conditions throughout the year as well as insight into larger trends in the broader economy.
Most of the centers that are in the LEARN network produce regular commentary and hold conferences that focus on regional economic developments and outlooks. For example, the University of Alabama's Center for Business and Economic Research publishes a quarterly newsletter titled "Alabama's Business," which includes an overview of economic conditions in the state as well as an outlook. In addition, they held a midyear economic update conference in July 2009.
Many centers also produce unique economic measures of local activity. For example, Kennesaw State University's Econometric Center produces a monthly purchasing managers index (PMI) for the state of Georgia and for the Southeast region. The regional PMI can be compared to the Institute for Supply Management's National PMI index to compare regional manufacturing trends to those developing at the national level.
We tap our LEARN members directly for insight into some of the questions we are trying to answer here at the Atlanta Fed. For example, when some national economic data began showing signs of improvement, we approached our network in the late spring and asked if they were seeing an increase in economic activity in their areas. The overwhelming response was that conditions remained very weak but appeared to be stabilizing. A number of the respondents also shared their belief that the economy would turn around in the second half of the year.
This information provided some additional perspective and helped in developing our opening sentence to the June Beige Book, which read, "Sixth District business contacts reported that economic activity continued to contract in late April and May, although the pace of decline had moderated in some industries and most noted that their outlook had improved."
More recently most of our LEARN members shared their belief that while economic conditions were turning, they expected only a modest recovery.
Finally, LEARN members are frequently cited in press reports, offering commentary with regard to economic developments at the local, state, regional, and national levels. My recent favorite comes from Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. He said in a June interview on National Public Radio that people should "forget the V-shape or other letters that economists talk about when they describe the economy. This will be a 'gravy boat recession' with a steady and gradual recovery. After touching bottom in the third quarter of 2009, we'll see GDP slowly climb like a gravy boat's spout." Who said economists can't be colorful?
I hesitate to highlight only a few members of our LEARN network because they are all doing very interesting work and are making significant contributions in the field of economic research and analysis. Fully understanding local economic developments and conditions would be impossible without them. We invite you to visit their Web sites—I promise you, there is indeed a lot to LEARN.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
August 19, 2009 in Economic Growth and Development, Forecasts, Local Economic Analysis and Research Network (LEARN) | Permalink
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- Southeastern Transportation: Tapping the Brakes?
- Southeast Manufacturing Slows in August
- It's Mostly Sunny in Florida
- Auto Manufacturing an Economic Boon for Tennessee
- Southeast Manufacturing Rebounded in June
- Southeast Manufacturing Dips in May
- Assessing the Impact of Oil Price Declines on Louisiana's Economy
- Seeking the Slack
- Middle Tennessee Consumer Confidence on the Rise
- Trials and Tribulations in Transportation
- November 2015
- September 2015
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- April 2015
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- February 2015
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- Local Economic Analysis and Research Network (LEARN)
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