Gulf of Mexico Origin, Waters, and Biota: Volume II, Ocean and Coastal Economy

2. The Productive Value of the Gulf of Mexico

The Productive Value of the Gulf of Mexico David W. Yoskowitz 2 Introduction The Gulf of Mexico has been referred to repeatedly as the most productive body of water in the United States. But exactly what does this mean? Is there a value that can be placed on this productivity? If so, how large is it and what use would this value be? The goal of this chapter is to answer these questions and, in so doing, to highlight the important role that the Gulf of Mexico plays in the economic lives of the United States, Mexico, and Cuba. For the purposes of this analysis the sectors of focus will be oil and gas production, port and shipping activity, tourism, and fisheries, during the year 2003, the most recent year for which complete data are available. There are, of course, a number of other activities, but focusing on these four critical industries offers a good overview of Gulf of Mexico economics. While it would be appropriate to include information about Cuba, because data from that country are not readily available, the discussions focus strictly on the United States and Mexico. Despite the oceans’ importance to us, and the fact that they cover two-thirds of the planet, relatively little work has addressed the oceans’ economic importance. To do that, we must begin by defining what we mean by the economic value of our oceans. The ocean economy is that portion of the economy that relies on the ocean as an input to the production process, or that takes place on or under the ocean. The coastal economy is that portion of economic activity that takes place on or near the coast (Colgan, 2004). These definitions have been used in the analysis of regional economies and are very useful for the policymaker. The government of Canada, for instance, conducted a study of the economic value of the ocean sector for Nova Scotia (Gardner Pinfold Consulting Economists, 2005). The gross domestic product (GDP) impact of the ocean sector in that economy was estimated at $1.65 billion ($2.62 billion Canadian) in 2001 and $2.56 billion ($4.08 billion Canadian) when spin-off effects were considered. This accounted for about 15% of Nova Scotia’s GDP. A similar assessment of California’s coastal and ocean economy (Kildow and Colgan, 2005) estimated that the value of that state’s ocean economy was approximately $42.9 billion for the year 2000. This accounted for 19% of the national ocean economy, when compared to the aggregated values for the United States economy. Although the concepts of the ocean and coastal economies are close to the idea of a productive value for the ocean, they still fall short in application to the question of the productive value of the Gulf of Mexico. The productive value, Previous Work 22 Yoskowitz as defined for the purposes of this study, is the market value of the resources extracted from the Gulf, or in the case of tourism and port operations, it is the value of the services generated as a result of proximity to the Gulf. Unlike the broader definitions of the ocean and coastal economies, the term productive value does not use a multiplier of any sort for income or employment. This deliberately narrower concept, therefore, offers a clearer picture of the value directly derived from the Gulf of Mexico itself. Data for some industry sectors covered in this chapter are not readily available, so significant research is required to generate the values. It is important to note that the definitions for certain terms involved in calculations are not always consistent between the United States and Mexico. Nonetheless, the productive values presented here are a positive first step that represents a lower bound or conservative minimum. To place the productive values generated in proper context, it is essential to understand how relevant data were obtained. A description of the methodological approach used for each sector is therefore provided in the sections that follow. Oil and Gas Production U.S. oil and gas production occurs at two main location types: federal leases and state leases. Production levels on federal leases were obtained from the Minerals Management Service (MMS, 2006), while production levels on state leases were acquired from the appropriate state regulating bodies. Production levels for oil were then multiplied by average prices in 2003 of $28.50 per barrel for oil and, for natural gas, $4.88 per thousand cubic feet. In Mexico, oil and gas are...