Blog Post

What Did the 2010 Deepwater Horizon Oil Spill and Offshore Drilling Moratorium Mean for the Workforce?

Aug 22, 2014 | Joseph E. Aldy

On April 20, 2010, the Transocean Deepwater Horizon suffered a catastrophic blowout while drilling in a BP lease in the Gulf of Mexico’s Macondo Prospect. This accident resulted in the largest oil spill in US history and an unprecedented spill response effort. Due to the ongoing spill and concerns about the safety of offshore oil drilling, the US Department of the Interior suspended offshore deep water oil and gas drilling operations on May 27, 2010, in what became known as the offshore drilling moratorium. The media portrayed the impacts of these events on local employment, with images of closed fisheries, idle rigs, as well as boats skimming oil and workers cleaning oiled beaches.

In a new RFF discussion paper, “The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Drilling Moratorium,” I estimate and examine the net impact of the oil spill, the drilling moratorium, and spill response on employment and wages in the Gulf Coast. The spill and moratorium represented unexpected events in the region, and the resulting economic impacts varied within and among the Gulf states. Coastal counties and parishes were expected to bear the vast majority of the burden of these two events, while inland areas were expected to be largely unaffected. The moratorium was expected to affect Louisiana—with significant support of the offshore drilling industry—but not, for example, Florida, which had no active drilling off of its coastline. Beyond the economic impacts, the timing and magnitude of the spill response varied across the states over the course of the spill as well.

Despite predictions of major job losses in Louisiana resulting from these events, I find that the most oil-intensive parishes in Louisiana experienced a net increase in employment and wages. In contrast, Gulf Coast Florida counties south of the Panhandle experienced a decline in employment. Analysis of the number of business establishments, worker migration, accommodations industry employment and wages, sales tax data, and commercial air arrivals likewise show positive economic activity impacts in the oil-intensive coastal parishes of Louisiana and reduced economic activity along the non-Panhandle Florida Gulf Coast. The billions of dollars of spill response and clean-up mobilized over the course of the spring and summer of 2010 positively impacted economic activity, similar to the effect of fiscal stimulus. The geographic variation in labor market impacts reflects the focus of spill response efforts in Louisiana and the absence of oil and thus spill response along the Gulf coast of Florida south of the Panhandle.