The economic impact of the Deepwater Horizon spill
After Katrina and 9/11, some people thought that higher GDP from rebuilding what was broken could be a silver lining. Since the accident and subsequent spill obviously had a negative effect on the wealth of our economy, it will be interesting to see if anyone is insane enough to suggest that the GDP impact of cleanup and containment spending (already totally around a billion dollars) is a silver lining to the spill. Broken window fallacies are popular, but in this case the negative impact of the spill on other industries such as fishing, tourism and other deepwater oil drilling projects might obviously outweigh the supposed benefits.
Analyzing the market capitalization movements of a certain company (which will remain nameless for legal reasons) suspected to be liable for clean up costs and economic claims, adjusting for the market capitalization change in their entire sector (which shall also remain nameless, I’m counting on my readers to figure out which company and which sector I am talking about here), suggests that the liability and clean up costs may total about $40 billion dollars. Of course, there are a few caveats to this calculation. For one thing, a lot of the market cap drop is probably related to potential sanctions or damage to their brand image and investors not wanting to hold a stock that is no longer a simple {insert sector} company. For another, the market might be pricing in a high chance of relatively contained costs and a small chance of very large clean up costs. Still, 40 billion dollars is a reasonable cap so the “positive” GDP impact is at most 0.3% of GDP.
