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NPR Hypes Economic Impact of Deep Water Drilling Ban

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Monday, 07 June 2010 04:21

NPR had a segment on Morning Edition which badly misled listeners about the potential economic impact of a temporary ban on deepwater drilling. The piece focused on the impact of oil on the economy of Louisiana and the Gulf region. In doing so, it highlighted the total impact of the oil industry, not the marginal impact of additional drilling.

For example, it told listeners that oil accounts for 16 percent of Louisiana's state GDP compared to 1 percent for fishing and 4 percent for tourism. This is an interesting set of numbers but it has nothing to do with the impact of a ban on new deepwater drilling. No one is proposing that existing wells be shut down. This means that the vast majority of this 16 percent of GDP will not be affected by the ban. (It is also worth noting that the vast majority of this 16 percent accrues to BP and quickly leaves the state.)

The piece does later give an estimate from the state's development department that the bad on drilling could lead to a loss of 20,000 jobs (this presumably includes indirect effects). By comparison, Louisiana has approximately 120,000 construction jobs. If we assume that each construction job indirectly generates 0.5 jobs elsewhere then the ban on drilling would have roughly the same impact as a ten percent decline in construction employment.

Comments (4)Add Comment
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written by izzatzo, June 07, 2010 9:38
Well, ok, but see, marginal is to incremental as total is to all, so change in total is to change in all, like, you know, the rise and run thing, the slope that is, the ratio of vertical to horizontal or vice versa, not the whole thing, just the part, because if it was the whole thing, then it wouldn't be marginal or incremental, which is what we want to report as news isn't it, the incremental effect, right?, because reporting the whole thing is rather useless isn't it, like reporting a car crash that kills a lot of people, then saying so what?, there's still a lot of people left, so let's just report them instead.

Looks good. Let's go with the story. When it's a downside for the corporate sector, report the total to make the incremental look insignificant, but when it's sensational and good for the corporate sector, ignore the total and just report the incremental.
In Louisiana, not all jobs are created equal
written by Mike Stagg, June 07, 2010 10:45
It is worth noting that 2,000 to 3,000 jobs is the estimated impact of job losses related to the moratorium announced by President Obama. The Department of Economic Development number is a projection if the moratorium goes out beyond six months, according to local papers.

These calculations are products of the Jindal administration which has shown its willingness to politicize responses to issues involving the federal government (see health insurance reform).

Finally, this administration is pushing a plan to eliminate the jobs of thousands of state workers through layoffs and privatization, and its Medicaid cuts have resulted in the loss of thousands of healthcare jobs in hospitals and clinics across the state. These job losses did not seem to faze the administration and those wailing the loudest about potential temporary job losses resulting from the deep water drilling moratorium.
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written by Queen of Sheba, June 07, 2010 4:14
The numbers quoted by NPR are really, really hinky. For one thing, I don't know what "oil accounts for 16 percent of Louisiana's state GDP" means. "Oil," in Louisiana, means much more than just working on oil rigs. LA has 17 oil refineries, including seven world-class refineries, which represent 17% of U.S. oil refining capacity. These jobs, and income from this portion of the "oil bidness," would not be affected even if all the drilling in the Gulf stopped tomorrow. "Oil" also includes tanker truck drivers taking petroleum products from the refineries to their final destinations as well as oil field service companies' workers who also work on land wells in the state.

Also, Louisiana does not collect royalties from any rigs farther than six miles off their shore. Last year oil royalties paid to Louisiana amounted to $35 million. These deep water wells don't add any money to Louisiana's coffers at all beyond the rig workers' salaries and the local offices of oil field services companies (which wouldn't necessarily shut down anyway, considering the number of land wells in the state).

I would be interested to know just how many Louisiana workers are employed on Gulf wells and how much money they bring into the state. But 16% of the state's GDP has to represent a lot more than just these people's income, which is the only large amount of money that would be affected by a shutdown of Gulf drilling.

It would be a shame for the rig workers to lose their jobs. But it was a shame when 20-mule team drivers, pony express riders, telegraphers and dirigible crews lost their jobs too.
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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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