The effects of the BP Oil Spill and Hurricane Katrina on businesses in South Louisiana.
Mancuso, Louis C. ; Alijani, Ghasem S. ; Kwun, Obyung 等
INTRODUCTION
The businesspeople of South Louisiana have gone through two major
disasters in a five year period where this research study shows that the
businesspeople have not been able to recover financially. Also, the
President of the United States has placed a moratorium on deep water
drilling for six months that has certainly hurt not only businesspeople
directly involved but also other businesses as well. CNN Money reveals
that small businesses are skeptical--at best--of BP's promise that
it will pay for all lost income and wages as a result of the oil spill.
This article states that it is certainly easier to pay individual
workers with a single W2 form than businesses such as real estate
agencies, restaurants and retail shops. CNN Money indicated that BP has
received 37,000 claims for compensation, but it has only made payment or
partial payments on 18,000, totaling just shy of $50 million (Clifford,
2010). The next round of payments is to bring the total to $84 million
(Clifford, 2010).
As of the writing of this study over two months have passed since
BP's Deepwater Horizon exploded and sank in the Gulf of Mexico
causing up to 125 million gallons of oil spilled, 1.4 million gallons of
dispersant used, 23.5 million gallons of oily water recovered, 80,806
miles of federal waters closed to fishing, 6,100 vessels responding to
the spill, and 1,360 animals found dead in the spill area (Thomas, 2010)
plus eleven people died on the Deepwater Horizon when it exploded.
Along with the environmental disaster is the economic calamity
unfolding in South Louisiana where as many as 25,000 jobs could be
affected by the six-month ban imposed by President Obama while the
investigation into the BP accident is underway. It has been projected
that the ban could cost the local economies between $3 billion and $5
billion a year (Hargreaves, 2010). Another economic calamity occurred in
August 2005 bringing Hurricane Katrina to South Louisiana. This storm
caused significant damage and still today South Louisiana has not fully
recovered. In the year following Hurricane Katrina, New Orleans'
population plunged 25%. And while the city has added some residents, the
population still sits well below pre-Katrina levels. In total, the
Crescent City has had a net loss of more than 126,000 people in the past
decade. That's higher than any other city in the country
(Infoplease).
METHODOLOGY
This study was conducted in Venice, Galliano, and Grand Isle,
Louisiana where Southern University at New Orleans Business
Entrepreneurship majors was asked to interview 200 South Louisiana
Business People. The students were supervised by the writers of this
article. The vast majority of the respondents were located on the Venice
Fishing Pier in Venice, in Grand Isle, and a big box store in Galliano.
Demographics and Location Diversity
Both Venice and Grand Isle sit on the Gulf of Mexico and Galliano
is approximately 36 miles from the Gulf, however, Galliano is on a bayou
that leads to the Gulf of Mexico. The most common industry in Venice is
fishing representing 13% of the industries located in the area
(city-data). The population of Venice is 2,220 with a median household
income of $40,523 (Muninetguide). Grand Isle has a population of 1,541
with a median income of $40,205 (Muninetguide). The leading industry in
Grand Isle is fishing representing 15% (Sumplyhired). Galliano has a
population of 7,356 (US City Home) and a median household income of
$31,419 (City Data Galliano). The most common occupations for males is
rail and water transportation (16%) and fishing (6%) (City Data
Galliano).
Research Issues
The objective of this research is to investigate the effects of
both Hurricane Katrina (a natural disaster) and the BP Oil Spill (a
manmade disaster) on the South Louisiana economy and the social
attributes and life of people. The above objective was expressed in
terms of a set of questions which are appropriately reflective of the
situation.
Q1. What is the approximate sales revenue per year of the South
Louisiana business people before the BP Oil Spill?
Q2. What percentage of the South Louisiana Businesspeople revenue
has decreased today (after the BP Oil Spill--June 18, 2010)?
Q3. What percentage of the South Louisiana Businesspeople revenue
was recovered after Hurricane Katrina and before the BP Oil Spill?
Q4. Are South Louisiana Businesspeople willing to do the same
business in Louisiana in the next five years?
Data Collection
As indicated previously the method of data gathering was based on
fact-to-face interviews from different locations. Over 200
questionnaires were collected randomly from the towns of Galliano,
Louisiana (40 questionnaires); Grand Isle, Louisiana (29
questionnaires); and Venice, Louisiana (131 questionnaires).
Again, Galliano is located approximately 36 miles up the bayou from
the Gulf of Mexico where it is one of the largest cities in this area of
south Louisiana consisting of big box stores, seafood processing plants,
moorings for the fishing fleet, etc. On the day the surveyors visited
this area the seafood processing plants were closed and the fishing
fleet was idle. The surveyors interviewed people at a big box store.
When the students visited Grand Isle, which is located on the Gulf
of Mexico, to conduct the interviews the town was a ghost town. No
restaurants were open, the camps had 'for rent' signs on them
and the few people seen were BP workers who would not talk to the
students. According to the census data, Grand Isle has a population of
1,541 people which expands in the summer to over 20,000
(Simplyhired--Grand Isle). Certainly this was not the case on June 18,
2010 when the survey was conducted. The students went on the main street
of Grand Isle to the major grocery store to solicit interviews. While
doing the interviews, which were conducted on a Friday, the people going
to the grocery store only purchased one or two items not the usual
filled grocery basket that would be normal.
Venice is located on the Gulf of Mexico. Venice fishermen were
gathered on the fishing pier where the students interviewed the
fishermen. The fishermen were gathered to talk to the BP people and were
trying to obtain work from the oil company.
OUTCOMES
Question 1:
Of the population studied, over eighty-seven percent were business
people having sales revenue of under $100,000 per year. Table 1 reveals
the approximate sales revenue per year for the three cities studied.
Galliano and Grand Isle both showed average sales revenue of $100,000 to
$249,999 whereas Venice had average sales revenue of under $100,000. The
following table indicates the results of the first question concerning
annual income of the residents before the Bp Oil Spill.
Question 2:
The respondents were asked to assume their business revenue was
100% before the BP Oil Spill. What percentage of the respondents'
business income has decreased today? Overall, the businesspeople
indicated that their income has dropped 21% to 40%. The businesspeople
of Galliano and Grand Isle indicated that their business revenue has
decreased 41% to 60% whereas the business people of Venice stated their
business revenue had decreased by 21% to 40%. Table 2 shows the results
of the second question concerning income decreasing.
Questions 3
The average overall revenue recovered after Hurricane Katrina and
before the BP Oil Spill was 21% to 40%. The businesspeople in Galliano
and Grand Isle average recovered revenue was 61% to 80% whereas, the
businesspeople in Venice was 21% to 40%. Table 2 reveals the average
overall revenue recovered after Hurricane Katrina and before the BP Oil
Spill. Table-3 shows the result of the third question concerning income
recovery after Hurricane Katrina and before the BP Oil Spill disaster.
Question 4
Table 4 will show how many businesspeople in South Louisiana will
be doing the same business in Louisiana in the next five years. Overall
the results reveal that the business people will stay in their current
business, however 27% of the respondents indicated 'unlikely'
and 'most unlikely,' therefore indicating these businesspeople
will not be conducting the same business over the next five years). The
table reveals that 33% of the Galliano population stated
'unlikely' or 'most unlikely.' The Grand Isle
population indicated that 41% will not be doing the same business.
Twenty-three percent of the Venice respondents stated they will not be
doing the same business in five years.
DISCUSSIONS AND CONCLUSIONS
In looking at the results of the data, the three Louisiana towns
could not be more different. Galliano is 36 miles up the bayou from the
Gulf of Mexico having big box companies servicing a large diverse town.
Grand Isle is an island community located on the Gulf of Mexico that is
composed of fisherman, real estate investors, and companies servicing
the tourists during the summer. Venice is also located on the Gulf of
Mexico but the people interviewed were fishermen waiting to hear about
possible jobs offered by BP.
While interviewing the people of Galliano many respondents were
extremely concerned that the following week many people working for the
big box companies would be laid-off of their current positions. USA
TODAY states that what is really worrying the shrimpers, oystermen,
charter boat captains, hunting guides and the oil rig workers across the
Gulf coast isn't today's losses, bad as they are; it is
tomorrow's losses (Wiseman & Watson, 2010).
USA TODAY interviewed a Venice charter boat captain where he stated
he lost everything he owned in Hurricane Katrina. "But the thing
about a hurricane is, 24 hours after it goes through, if you've got
the guts and fortitude; you can get nails and start rebuilding. But no
one knows the long-term effects of the (oil) contamination"
(Wiseman & Watson, 2010). Oysterman Mitch Jurisich indicated that if
his business gets shut down he and his fellow oysterman have to worry
about foreign oysterman supplying oysters to the United States (Wiseman
& Watson, 2010).
BBAA Compass economists Nathaniel Karp stated that the direct
economic toll of the BP oil spill is close to $11.5 billion (Wiseman
& Watson, 2010).
The businesspeople interviewed indicated that 'likely'
they will be doing the same business in Louisiana in the next five
years. However, overall 27% of the respondents indicated they will not
be doing the same business in Louisiana in the next five years. The
following shows who will not be doing the same business in Louisiana in
the next five years by towns studied:
Galliano 33% will not be doing the same business in Louisiana in
the next five years
Grand Isle 41% will not be doing the same business in Louisiana in
the next five years
Venice 23% will not be doing the same business in Louisiana in the
next five years
The businesspeople of south Louisiana have gone through two major
disasters in a five year period where this research study shows that
they have not been able to recover financially. Also, the President of
the United States has placed a moratorium on deep water drilling for six
months that has certainly hurt not only businesspeople directly involved
but also other businesses as well. CNN Money reveals that small
businesses are skeptical--at best--of BP's promise that it will pay
for all lost income and wages as a result of the oil spill (Clifford,
2010). This article states that it is certainly easier to pay individual
workers with a single W2 form than businesses such as real estate
agencies, restaurants and retail shops (Clifford, 2010). CNN Money
indicated that BP has received 37,000 claims for compensation, but it
has only made payment or partial payments on 18,000, totaling just shy
of $50 million (Clifford, 2010). The next round of payments is to bring
the total to $84 million (Clifford, 2010).
When the students visited Grand Isle to conduct the interviews the
town was a 'ghost town.' No restaurants were open, the camps
had 'for rent' signs on them and the few people seen were BP
workers who would not talk to the interviewers. According to the census
data, Grand Isle has a population of 1,541 people which expands in the
summer to over 20,000 (Simplyhired--Grand Isle). Certainly this was not
the case on June 18, 2010 when the survey was conducted. The students
went on the main street of Grand Isle to the major grocery store to
solicit interviews. While doing the interviews, which were conducted on
a Friday, the people going to the grocery store only purchased one or
two items not the usual filled grocery basket that would be normal.
In Galliano, the interviewers stopped at a big box store to conduct
interviews. While seeking business people some employees of the big box
store indicated they will be laid off next week. Certainly, it was a
striking scene to see shrimp boats docked and shrimp and oyster
processors shut-down due to the oil spill.
The Galliano workers indicated they did not receive nor did they
want government funds after Hurricane Katrina. All they desire is to get
back to work. Unfortunately due to the BP Oil Spill these people are
going to have to make some long-term life-changing decisions.
Four costs can be attributed to the BP oil spill and Hurricane
Katrina catastrophes:
The political cost
The environmental cost
The economic cost
The emotional cost
This study's focus was to measure the economic costs
associated with these catastrophes. As seen in the 'ghost
town' of Grand Isle the projected loss in tourism dollars could
range from $7.6-$22.7 billion over three years if the tourism industry
does not recover. (Jervis, 2010) While in Venice, Galliano, and Grand
Isle seeing the closed fishing areas, closed seafood processing plants,
closed restaurants, bars, and 'for rent'/'for sale'
signs indicates the economy as a whole is suffering. USA TODAY states
that the economy as a whole will lose $1.2 billion in economic output
and 17,000 jobs by year's end. (Jervis, 2010) The final leg of the
economic cost triad of tourism and seafood is the deep-water drilling
industry closure. As was seen firsthand by the effects of lay-offs in
Galliano, projections have indicated that the loss of the deep-water
drilling industry will cost the economy $2.1 billion and 8,000 jobs as a
result of the moratorium (Jervis, 2010).
The most striking results of this study was that the interviewees
in Galliano (33%), Grand Isle (41%), and Venice 23% stated in the next
five years they will not be doing the same business in Louisiana.
Certainly, south Louisiana will lose a cherished 'way of
life.' Future research should be conducted on the same parameters
of this research study in the short-term every six to ten months to show
the effects of the oil spill/hurricane long-term.
REFERENCES
"Boothville-Venice, Louisiana."
(http://www.muninetguide.com/states/louisiana/municipality/Boothvill
...).
City Data. "Galliano, Louisiana."
http://www.city-data.com/city/Galliano-Louisiana.html.
Clifford, Catherine, Guillot, Craig, and Rooney, Ben. "Gulf
businesses fight for BP payments." June 9, 2010.
http://money.cnn.com/2010/06/09/smallbusiness/small_business_bp_c ...
Frank, Thomas (2010, June 21).. "Oil fund chief promises fast,
fair payments."USA TODAY, p. 8A.
"Grand Isle Jobs." Simplyhired.
http://www.simplyhired.com/a/local-jobs/city/1-Grand+Isle,+LA
Hargreaves, Steve. "Drilling ban: the jobs at stake."
Cnnmoney.com. June 24, 2010. http://money.cnn.com/ fdcp?1277409388746
Infoplease. http://www.infoplease.com/ipa/A0763098.html
Jervis, Rick. "As well is capped, the mark on the Gulf region
will endure." USA TODAY, August 5, 2010, pp. 1A-2A.
MuniNetGuide. "Grand Isle, Louisiana."
http://www.muninetguideguide.com/states/louisiana/municipality/
Grand_Isl..
Simplyhired. "Grand Isle Jobs."
http://www.simplyhired.com/a/local-jobs/city/I-Grand+Isle,+LA.
US City Home. "Galliano, Louisiana--Demographics."
http://www.us-city-home.com/louisiana/galliano/demographics.html.
Wiseman, Paul & Watson, Tim (2010, June 9). "Future losses
worry Gulf businesses." USA TODAYp. 5B
"Work and Jobs in Boothville-Venice, Louisiana Detailed Stats:
Occupations, Industries, Unemployment, Workers, Comute."
http://www/city-data.com/work/work-Boothville-Venice-Louisiana.html.
Louis C. Mancuso, Southern University at New Orleans
Ghasem S. Alijani, Southern University at New Orleans
Obyung Kwun, Southern University at New Orleans
Table 1: APPROXIMATE ANNUAL SALES REVENUE
Revenue Galliano Grand Isle Venice Total
Less than $100,000 11 7 76 94
27.5% 24.1% 58.0%
$100,000 to $249,000 6 4 19 29
15.0% 13.8% 14.5%
$250,000 to $499,000 9 7 33 49
22.5% 24.1% 25.2%
More than $500,000 7 5 3 15
17.5% 17.2% 2.3%
Total Completed 33 23 131 187
Responses 82.5% 79.3 100%
Total Responses 40 29 131 201
Table 2: Decreased Income Due To Bp Oil Spill
Percentage Galliano Grand Isle Venice Total
0% 3 1 25 29
7.5% 3.4% 19.1%
1% to 20% 0 0 16 16
0% 0% 12.2%
21% to 40% 5 1 27 33
12.5% 3.4% 20.6%
41% to 60% 5 8 33 46
12.5% 27.6% 25.2%
61% to 80% 13 7 20 40
32.5% 24.1% 15.3%
81% to 100% 8 1 10 19
20.0% 3.4% 7.6%
Total Completed 34 18 131 183
Responses 85% 62.1% 100.0%
Total Responses 40 29 131 200
Table 3: Overall Revenue Recovered After Hurricane Katrina And Before
The Bp Oil Spill
Percentage Galliano Grand Isle Venice Total
0% 2 2 25 29
5.0 6.9% 19.1%
1% to 20% 1 0 16 17
2.5% 0% 12.2%
21% to 40% 1 1 31 33
2.5 3.4 23.7%
41% to 60% 4 3 41 48
10.0% 10.3% 31.3%
61% to 80% 9 5 9 23
22.5% 17.2% 6.9%
81% to 100% 8 7 5 20
20.0% 24.1% 3.8%
Over 100% 8 5 4 17
20.0% 17.2% 3.1%
Total Completed 33 23 131 187
Responses 82.5% 79.3% 100.0%
Total Responses 40 29 131 200
Table 4: Business Continuity For Next Five Years
Revenue Galliano Grand Isle Venice Total
Most Likely 9 4 39 52
22.5% 13.8 29.8%
Likely 7 5 37 49
17.5% 17.2% 28.2%
Neutral 5 2 25 32
12.5% 6.9% 19.1%
Unlikely 10 8 15 33
25.0% 27.6% 11.5%
Most Unlikely 3 4 15 22
7.5% 13.8% 11.5
Total Completed 34 23 131 188
Responses 85% 79.3 100.0%
Total Responses 40 29 131 200
