Florida Gets Millions from BPexternal image bp_logo1.jpg

By: Carlie Gehlhausen and Alison Cornell

Summary of Article: Florida Gets Millions From BP

British Petroleum (BP), a huge fuel provider nationwide, has recently announced they will be giving the Northwest Florida Tourism Council (NWFTC) 30 million dollars towards Florida’s tourism industry to help boost the recovery process from the devastating oil spill along the Gulf Coast. The NWFTC is a well-recognized marketing union that formed during the tragic spill to try and diminish loses to those affected by tourism. Chairperson for the NWFTC, Dawn Moliterno, said in a recent news press, “We believe this additional marketing push will be just what Northwest Florida needs to create that share of voice to showcase that our beaches are as beautiful as ever.”


external image 100712NS-LS-RickScott11_t607.jpgWith the coalition wanting to correct any misunderstandings due to the impact of the Florida oil spill, BP’s grant will be allocated over the next three years to the seven tourism department councils (TDCs) to be used for nationwide marketing. Rick Scott, Governor of Florida, recently reported, “I’m pleased that BP is doing the right thing, and I’m optimistic that with the assistance of this grant the world will know that Florida’s beaches are as beautiful as ever and open for business. However, this is just one small step on the road to recovery, and I’m going to continue to hold BP accountable to Floridians and the businesses that lost millions of dollars because of the oil spill."

Below: Link to Governor Rick Scott’s news interview
Rick Scott BP Pressor

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With the oil spill being the largest in U.S. history, it was economically disastrous for the Florida Panhandle last spring and summer. Restaurants, hotels, beaches, and popular attractions really struggled in this catastrophic situation. Some federal waters were even closed off from fishing and deaths of dolphins and turtles have continued to rise. Companies along the west coast of the state lost millions of dollars due to the oil spill. The assistance from this grant will help marketers let non-Floridians know that the beaches are back and open for business. Luckily the grant will be taken into effect and appropriated before the Panhandle’s peak tourism season. With spring and summer being the most popular season along the coast, Moliterno was relieved that her company will be receiving the money before the crowds return. This article sheds light on a huge ongoing issue in the Florida economy involving marketing and tourism, which accounts for billions of dollars yearly for the Sunshine State.


Economic Analysis:

On April 20 2010, and explosion occurred in the Gulf of Mexico causing the world’s largest accidental marine oil spill. BP (British Petroleum) is a very well
respected and dominant oil drilling company with mining rigs set up all over the world. The company had a rig set up in the Gulf of Mexico called the Deepwater Horizon, in which the drill column was under too much pressure and methane gas shot up through the column causing a massive explosion that killed 11 workers and injured 17. When this explosion occurred, the cap to the oil well snapped off leaving thousands of gallons of oil each day pouring into the Gulf of Mexico for the next three months. The implications of this massive explosion were eminent danger, as time went on however it became clear that the Florida tourism industry was feeling the burden of this tragic accident.
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Deep Water Horizon oil rig April 20 2010

Florida attracts millions of tourists due to its hot weather, great beaches and other various attractions. After the oil spill occurred, the industry started to fall apart because people simply were not travelling to Florida anymore and the demand for tourism was way down. Hotels, restaurants and beaches are just a few of the industries that felt the harsh effects of this oil spill. Another industry that was seriously affected by the spill was the fishing industry. Not only was the demand down for various attractions, but the supply of seafood was also hurt by the spill because wildlife was dying by the millions. Although this costs the tourism industry an estimated $23 billion, BP was required to fund an emergency marketing plan to reboot the industry. Although $30 million for marketing is not near enough money to replace what was lost due to the spill, it is the start for Florida to attract tourists again. Economists believe that an emergency marketing fund is the appropriate route to take in these situations because it is what is needed to get the word back out there that the industry is up and running again. Although the industry is making fast improvements, the economic effects of this negative externality will be felt for years to come.


Critical Thinking Questions:

1. How would Florida’s economy benefit from the $30 million from British Petroleum?
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- Overall, Florida’s revenue will significantly rise due to the increase in profits from the tourism. With the TDCs marketing nationwide to help businesses build back up, more tourists will now visit the beaches, meaning spending will continue to climb. Hotels, restaurants, beaches, and popular attractions will gain more and more revenue as the peak season progresses. With a portion of these businesses’ income going to the state government through taxes, Florida’s revenue will see much greater numbers in 2011 compared to last year’s revenue. Florida will reap its benefits from the increasing tourism revenue and this in turn will help maintain a stable and efficient economy.


2. How would this untimely disaster economically impact Florida’s tourism? external image beach1,0-600x400.jpg
- With spring and summer being the peak tourism season for the Florida Panhandle, Florida businesses cannot afford to have any negative externalities in the way of their income. The disaster happened directly in the middle of their prime season and this dramatically set Florida companies back millions of dollars for the 2010 tourism year. Not to mention the fact that it is not easy to attract tourists to Florida if oil is engulfing the beaches. It is very difficult to recover economically in such an untimely catastrophe, but with BP’s marketing grant, Florida’s tourism councils are effectively taking the necessary steps to financially prepare for their 2011 season.


3.What Factors must be taken into account when deciding on a dollar amount that the Florida Tourism industry receives from BP?

- It is evident that Floridas tourism industry endured a great negative impact due to the BP oil spill. Florida runs itself on being a popular vacation destination with its hotels, beaches, restaurants and many other attractions. The Florida tourism industry is estimated at a total of $ 65 billion and the oil spill was estimated to cost Florida $23 billion in the first year. With such a great financial impact on the industry what factors would be taken into consideration to finalize $30 million as compensation. In the short run, the industry will immediately lose a great amount of revenue because the demand for these attractions has drastically decreased. Tourists will not be travelling to Florida because the Utility gained from a vacation is very low due to the oil spill. Many companies such as the fishing businesses had to shut down and fire employees. Although this will cause a company to save money because they have less costs, many times the total fixed costs of a business will not change only the variable costs leaving companies at a loss of millions of dollars. This occurs because companies become stuck paying for certain costs (fixed costs) of their businesses without generating any revenue. The industry also had to directly pay 3.5 million just to clean up which is an added variable cost of the spill. In the long run, the implications of the oil spill will decrease and the demand for Florida tourism will increase building up the industry again. The negative externality that the oil spill has caused however will still be prevalent and continue to have an effect on the industry. With all of these factors taken into account, BP it seems has gotten off easy in reparations of only $ 30 million, considering the intense effect that the oil spill has taken on Florida’s tourism industry .
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Works Cited


Sources:

Discovery Communication.(2010). Travel and Nature. Retrieved March 2011, from Tree Hugger : http://www.treehugger.com/files/2010/07/bp-gulf-oil-
spill-impact-tourism-oxford-travel.php

Oxford Economics . (2010 ). Potential Impact of the Gulf Oil Spill on Tourism .

Scott, G. R. (2011, April 11 ). BP Press Conference .

Silver, M. (April 12 2011). Florida Gets millions From BP. Epoch Times http://www.theepochtimes.com/n2/united-states/florida-gets-millions-from-bp-54585.html.

Pictures:

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