Oil Slick – The Great Depression Dust Bowl Revisited

May 3, 2010

When following coverage of the Gulf of Mexico oil spill (let us call it the
“Oil  Slick”),  I  cannot  help  but draw comparisons to the Dust Bowl of the
1930s,  which  exacerbated and prolonged the Great Depression. Both natural
calamities  occurred  during periods of economic weakness, characterized by
high  unemployment  and  sluggish  or  negative  growth.  Both  occurred in
relatively  impoverished  areas of the country where wealth is dependent on
natural  resources  (agriculture for the Dust Bowl, fishing/tourism for the
Oil  Slick).  Those  who  will be directly impacted are people who are most
vulnerable to any sort of unanticipated calamity.
But these comparisons are academic.

What is real is that the Oil Slick can have drastically negative impacts on
our  fledgling  economic  recovery. Sanford Bernstein analysts predict that
the  final  cost for cleaning up the spill could be $7 billion. The cost to
the  fishing industry in Louisiana could be $2.5 billion, while the Florida
tourism industry could lose $3 billion.

Yet  it  is  likely  that  that  cleanup  and  damages  figures  are vastly
underestimated.  BP’s  state-of-the-art  safety  measures  have all failed.
Furthermore,  there  is no precedent for deepwater leaks – a blowout at the
depth  of  5,000 feet has never occurred before. We’re also in the region’s
hurricane  season,  which could hamper clean-up efforts. To demonstrate how
accurate  projections can be, note that BP had previously ruled an accident
as “unlikely or virtually impossible”.

In the worst case scenario, the oil leak continues for months, damaging the
Gulf  for  a  generation.  The  Oil  Slick drifts beyond the Florida coast,
enters  the  Gulf-stream  and  sweeps  up  the  eastern coast of the United
States. Years of damage-control costs, in addition to lost revenue from the
adversely  impacted  states  could  lead  to  hundreds of billions worth of
federal  deficits.  This  would  impact  the  broader  economy,  raise  the
possibility  of a “double-dip” recession, and thus heighten the Oil Slick’s
likeness to the Dust Bowl.

Veering back to the academic, the Dust Bowl and the Oil Slick share similar
lessons  in  conservation.  Both  environmental  calamities  were caused by
unchecked  economic  development. The Dust Bowl was caused by unsustainable
agricultural  development.  The  Oil  Slick is a symptom of our reliance on
petroleum, which has caused us to drill for it in ever more hazardous places. Let
us hope that the similarities end here.

Key Facts (for when you rant at your friends):
-The Oil Slick is now 130 miles long and 70 mile wide.
-The current leak rate is 200,000 gallons of oil per day
-Oil  from  the leaking well is lighter than the Alaskan crude spilled by
the Exxon Valdez, which will lead to more toxic impacts.

Sources:

http://www.reuters.com/article/idUSTRE6412H820100502

http://www.examiner.com/x-43367-International-Headlines-Examiner~y2010m5d2-BP-said-an-accident-was-virtually-impossible-that-would-lead-to-giant-oil-spill

http://www.businessweek.com/news/2010-04-30/u-s-gulf-states-mobilize-for-valdez-like-oil-spill-update4-.html

http://www.ritholtz.com/blog/2010/05/oil-slickonomics/

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2 Responses to “Oil Slick – The Great Depression Dust Bowl Revisited”

  1. mmm Says:

    nice to know the Feds answer to this problem and most others is to rip off the savers who invest with them, or forse the savers money into gambles of insecuritys for other rip offs………not….


  2. Great post. I just did a post on the dust bowl too (www.WhatMakesUsAmericans.com) And I was thinking the same thing. We take all we can from the land and we are shocked when it bites back (the oil slick)! Check out my video and the song I wrote about the Dust Bowl and let me know what you think. Thanks again for the great post!


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