The Deepwater Horizon accident in the Gulf of Mexico is a disaster unfolding before our eyes. Eleven lives were lost in the initial explosion, and that incalculable loss is compounded daily as oil continues to flow from the wellhead despite efforts on the part of BP and TransOcean to quell it. No one can accurately predict how long it will take to cap the leaking wellhead: it could be a matter of days, weeks, months.
In what is looming as another public relations predicament for Goldman Sachs, the banking giant admitted today that it made "a substantial financial bet against the Gulf of Mexico" one day before the sinking of an oil rig in that body of water.
The new revelations came to light after government investigators turned up new emails from Goldman employee Fabrice "Fabulous Fab" Tourre in which he bragged to a girlfriend that the firm was taking a "big short" position on the Gulf.
"One oil rig goes down and we're going to be rolling in dough," Mr. Tourre wrote in one email. "Suck it, fishies and birdies!"
The news about Goldman's bet against the Gulf comes on the heels of embarrassing revelations that the firm had taken a short position on Lindsay Lohan's acting career.
Even as BP (British Petroleum) finished construction on one massive containment dome Monday and started drilling a relief well to cope with the oil leaking from crumpled pipes at the bottom of the Gulf of Mexico, lawmakers and Gulf Coast residents began questioning whether the company will take full responsibility for the economic losses stemming from the spill.
The economic implications of the disaster are potentially mammoth, but highly uncertain. The annual commercial seafood harvest in the gulf is $661 million, recreational fishing contributes $757 million and nearly 8,000 jobs, and tourism related to wildlife adds $517 million, according to the Harte Research Institute for Gulf of Mexico Studies.
It remained unclear Monday how much damage those industries will incur from the oil spill, and how long that damage will last. The research group estimates that $1.6 billion in annual economic activity is tied to the wetlands directly exposed to the spill. Some analysts see the potential for even more dire outcomes. David R. Kotok, chief investment officer of Cumberland Advisors, laid out scenarios in a note to clients that range from damages in the tens of billions of dollars and years of cleanup to a cost in the hundreds of billions of dollars that leaves the gulf as a "damaged sea" for a generation.
"I've been in Pensacola and I am very, very concerned about this filth in the Gulf of Mexico," Florida Gov. Charlie Crist said at a fundraiser for his US Senate campaign Sunday night. "It's not a spill, it's a flow. Envision sort of an underground volcano of oil and it keeps spewing over 200,000 gallons every single day, if not more."
Fishermen from the mouth of the Mississippi River to the Florida Panhandle got the news that more than 6,800 square miles of federal fishing areas were closed, fracturing their livelihood for at least 10 days and likely more just as the prime spring season was kicking in. The slick also was precariously close to a key shipping lane that feeds goods and materials to the interior of the US by the Mississippi River.
Everything engineers have tried so far has failed. After the April 20 oil rig explosion, which killed 11 people, the flow of oil should have been stopped by a blowout preventer, but the mechanism failed. Efforts to remotely activate it continue to prove fruitless, weather has hampered plans to burn the oil and is making booms all along the coast ineffective.
