Unemployment Underscores Economic Benefits of Energy Exploration
By Hank Fishkind
As debate swirls around the proposal to open Florida’s coastal waters to energy exploration, and with Florida’s unemployment rate now more than 12 percent, it is more important than ever to analyze the potential economic effects that the creation of a new energy industry could have on our state.
In my estimation, the economic impacts of opening Florida’s coastal waters to energy exploration would be a huge net positive. According to our projections, even at a low estimate of offshore energy reserves, offshore drilling could boost Florida’s economy by more than $7 billion a year and create more than 40,000 jobs.
At the higher estimate of reserves, creating a Florida-based energy sector would grow the state’s economy by a $41 billion a year and create 231,000 new Florida jobs.
Authorizing offshore drilling to access Florida’s oil and natural gas reserves is one of the few tools at policymakers’ disposal that could create an entire new industry almost literally overnight. Moreover, it would have the dual benefit of not only creating critically needed jobs, but providing a unique new source of significant public revenues without raising taxes or incurring public debt.
According to the most conservative estimate of available energy reserves, state revenues from energy severance taxes and royalties could amount to $2.3 billion a year. That would allow Florida to increase funding to state universities by half, provide health insurance to more than a million children, or educate nearly 300,000 school children. At a higher baseline of reserves, Florida could collect as much as $12 billion a year in direct oil and gas revenues.
If Florida continues to cut programs such as higher education, transportation and infrastructure investment, it will deepen its economic recession and slow the pace of future growth. Accessing Florida’s energy reserves is a dynamic way to stimulate the state’s private and public sectors simultaneously, which could restrain and potentially reverse this economic downturn.
Of course, opponents of the proposal point to Florida’s tourism industry as an important consideration for policymakers. Despite the fact that virtually 100 percent of tourists who visit Florida must consume petroleum to power their automobiles or airplanes, these opponents say Florida should not even consider a an energy policy that could present a risk to tourism, no matter how slight.
I believe a sound Florida energy policy will produce far more economic benefit than coastal risk, will support the large needs of the tourist industry and pose no risk to the inland portions of the industry which accounts for fully 50 percent of statewide visitor activity.
It is important to note that offshore drilling conducted under U.S. environmental safety standards is extremely safe. There have been no significant oil spills as a result of offshore drilling within the United States in 40 years, and offshore drilling is not and would not be the largest factor presenting such an oil spill risk.
On the contrary, it is the shipment of the huge amount of oil, gasoline and diesel fuel that Florida consumes each day that presents a far more significant risk in terms of an oil spill. Every day, Florida consumes about 28.5 million gallons of gasoline and diesel fuel. That works out to about 10.4 billion gallons of gasoline and diesel fuel a year – or enough to fill Shamu’s tank at Sea World in Orlando 1,485 times.
Much of this fuel is shipped to Florida by tanker ship. In fact, that is how Florida suffered its last significant oil spill: the Tampa Bay tanker spill of 1993. This event is probably the best tool we have to measure the potential effects of an oil spill on Florida’s economy – though the spill was not caused by offshore drilling.
On Aug. 10, 1993, three vessels collided at the mouth of Tampa Bay, resulting in a spill of about 7,850 barrels of No. 6 fuel oil and a combined 760 barrels of jet fuel, diesel and gasoline oil. The fuel dispersed onto beaches at Egmont Key, Mullet Key, and about 13.5 miles of densely populated barrier beaches in Pinellas County.
The environmental and economic impacts of this spill were summarized in a 2000 study sponsored in part by the National Oceanographic and Atmospheric Administration, which concluded that the 1993 Tampa Bay spill resulted in very limited impacts on beaches or on tourism. The final damage amount determined in the settlement consent decree for the environmental restoration plan was $8.6 million. There was no permanent damage and the restoration plan successfully restored all natural and economic resources.
During the 13-month period following the spill in August 1993, tourism in Pinellas County declined no more than 2 percent. State of Florida tourist development monthly tax revenues fell 2 percent during this period compared with the expected average revenue numbers. In addition, the total estimated hotel sales revenue declined $3.1 million during the 13-month period, though other factors, such as the tourist murders that occurred at that time and the recession of 1991-1992, no doubt contributed to this decline.
By September of 1994 – 13 months after the August 1993 spill – tourist tax revenues and hotel revenues returned to and exceeded those levels prior to the spill. At no time were there damages approximating billions of dollars, nor was there a precipitous decline in tourism levels. The Great Recession of 2008-2010 produced far greater losses than the oil spill of 1993.
The evidence indicates that offshore drilling in Florida waters would present a significantly lower risk than numerous other factors that threaten Florida’s beaches – particularly the continuing risk presented by oil tankers supplying our state’s insatiable demand for gasoline and diesel fuel. That particular risk will remain whether or not Florida enables offshore energy exploration.
The question for policymakers, therefore, as unemployment swells to nearly 12 percent of the workforce, is whether an energy policy that could create between 40,000 and 231,000 jobs virtually overnight and boost Florida’s economy by $7 billion to $41 billion a year is worth considering.
As lawmakers prepare to cut Florida’s state budget for the fourth year running, a policy that could present $2.3 billion to $12 billion a year in new revenues may well deserve a second look.
Hank Fishkind is principal of Fishkind & Associates Inc., Florida’s leading economic and market analysis firm.
