Bp Oil Spill and Economic Effects

The Deepwater Horizon oil spill (also referred to as the BP oil spill, the Gulf of Mexico oil spill, the BP oil disaster, or the Macondo blowout) is an oil spill in the Gulf of Mexico which flowed for three months in 2010. It is the largest accidental marine oil spill in the history of the petroleum industry. The spill stemmed from a sea-floor oil gusher that resulted from the April 20, 2010, explosion of Deepwater Horizon, which drilled on the BP-operated Macondo Prospect.

The explosion killed 11 men working on the platform and injured 17 others. On July 15, 2010, the leak was stopped by capping the gushing wellhead, after it had released about 4.9 million barrels (780,000 m3) of crude oil. An estimated 53,000 barrels per day (8,400 m³/d) escaped from the well just before it was capped. It is believed that the daily flow rate diminished over time, starting at about 62,000 barrels per day (9,900 m³/d) and decreasing as the reservoir of hydrocarbons feeding the gusher was gradually depleted.

On September 19, 2010, the relief well process was successfully completed, and the federal government declared the well "effectively dead". But that was not the end of it, the impacts of this oil spill spread far and wide, affected the entire global oil & gas industry. According the recent report done by scientists, they estimated that the BP oil spill incident in the Gulf of Mexico is the biggest oil disaster in the world. This Deep Horizon Disaster has badly affected the ecosystem of the Gulf region and many people have been suffering from financial difficulties. This unfortunate incident has actually brought a lot of negative impacts to the global economy.

The Deepwater Horizon accident will have a costly impact on global oil prices.

BP Group Chief Economist Dr. Christof Ruhl, in a visit to Western Australia in June, warned that oil and gas exploration will become more costly for everyone. “This is an accident which will change the industry. Think back to when you had the (1989) Exxon Valdez disaster.” (The Australian 2010) The 1989 disaster triggered dramatic changes in the industry, including the mandatory fitting of double-hauled tanks into oil transport ships. Moreover, Oil and Gas exploration in the Gulf has already come to a grinding halt.

We are able to see some direct effects on certain industries. It is also time for us to take a look at the “Average Joe” and anticipate some worse scenarios in the coming future. We talk about the prices for the oil and gas. Although there was no price increment after the oil spill incident immediately, it doesn’t mean that we have sufficient supply in the near future and the prices will remain the same. We should not be too happy now. Many financial experts estimate that the fuel prices will increase gradually in the long run. Are you ready to pay more for the petrol?

Next, we look at the stock market. The market is uncertain and it is getting harder to predict the movements. The effects of global economy downturn are still there and there is no obvious improvement. Even if you are not the residents of the Gulf of Mexico, you will still feel the negative impact. The oil spill incident is considered a nightmare for the BP shareholders and those pensioners in UK. UK pension funds are the major BP shareholders. Since the disaster, The BP's share value has been decimated and many people have suffered loss from the BP stock market crash.

According to the previous statistics, the Gulf fishing and tourism industries produced an average annual income of .5-.5 billion for the past few years. Right after the oil spill incident, the annual income for the year of 2010 has been reduced dramatically. The sea water has been contaminated and most of the marine lives were killed. The fishing industry is considered “dead” at the moment because nobody dares to eat seafood in the Gulf region. The seafood wholesalers have suffered huge losses. The environmental damages have great potential to wreck the economy.

Same thing happens to the tourism industry. Almost all the tourists who have planned to spend their summer at the Gulf of Mexico cancelled their vacation right after the oil leak. They are not willing to waste their time at the tourist spots because in their opinion, the sea hasn’t been cleaned up completely and the beaches are no longer safe. Although BP has allocated billions to compensate the affected victims, these people are not able to survive in the long run. It may take years for the residents and business owners to recover from this crisis.

View as multi-pages