Using the Supply and Demand Model to
Demonstrate the Effects of the BP Oil Spill
on the Supply of Shrimp
Julia Albert
Econ 331A
University of Mary Washington
Abstract
The BP oil spill in the Gulf of Mexico negatively impacted the supply side for the
market of shrimp. The negative externalities caused by failed oil fracking lead to
massive amounts of crude oil contaminating the ocean, and the ecosystem. This paper
will demonstrate the effects of this contaminated water on the production side of the
fish market. It demonstrates how the shortage of shrimp affects the quantity supply
and price for shrimp after the water contamination. The negative externality caused
by the oil spill would decrease the quantity supplied of shrimp, causing a shortage that
would lead to an increase in the price. This would decrease consumption for shrimp
caught in Louisiana.
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I. Background
The site of the oil spill was on the Gulf of Mexico, where 172 million gallons of
Louisiana crude oil spilled into the water. More than a third of federal waters in the Gulf were
closed to commercial fishing due to fear of toxins contaminating the seafood. Drilling crude oil
requires metals such as mercury and lead, and scientists have found many of these organic
compounds in the sediments in oil spill zones. These chemicals and metals can be found in the
marine organisms, which raises the concern that the seafood is unsafe to consume. The Gulf of
Mexico account for an eighth of total shrimp supply in America. Although only a third of the
Gulf was shut down due to ocean contamination, the lingering pollution can still cause
reproductive mutations in the marine life, as well as death. Not only did fishermen have to cut
production due to the contamination, but it also created long term effects on the marine life.
Although shrimp mutation has a longer lag period then the immediate effects on the supply of
shrimp, mutation such as tumors on the head of shrimps, shrimp without gills, missing eyes, and
babies still attached to them are still a current issue for fishermen (Chan 2012).
II. Supply of Shrimp:
Chemicals such as polycyclic aromatic hydrocarbons (PAHs) are released into the water
during oil spills. One lab (EMSL Analytical, Inc.) sampled frozen Gulf shrimp and found levels
of Anthracene, a toxic hydrocarbon associated with petroleum, that had twice the levels of what
the FDA finds acceptable (Dahr 2012). These chemicals can cause mutations, developmental
defects, or cancer in wildlife and humans. Although many species of shrimp in Louisiana are
somewhat resistant to the effects of water contamination from oil, the shrimp eggs and larvae
remain sensitive to the oil. The spawning season for these shrimp occur during April and June,
aligning with the BP oil spill. The typical life span for these crustaceans is ~1.5 years. The
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effects on the larvae and shrimp eggs could cause a shortage in the population of shrimp if the
adult shrimp fail to procreate during that duration. Although the US only imports an eighth of its
shrimp from the spill, it still influenced the supply of shrimp caught or landed. There is a notable
drop in shrimp landed from 2009 to 2010. This decrease is shown in Figure 1.
Figure 1: Shrimp Landed in the Gulf:
In Louisiana, the primary month for shrimp is May. In May of 2010, 65% less shrimp were
landed than in May of 2009 (NOAA 2013). May 2010 revenues in Louisiana were 44% less than
they had been in May of 2009 (NOAA 2013). In Texas, the peak month for shrimp is August. In
August of 2010, 26% less shrimp were landed than in May of 2009 (NOAA 2013). There are
many variables that can contribute to the decrease in supply of shrimp. Factors that are attributed
to the shortage include:
1. 33% of the federal waters closed to commercial fishing during June
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2. The loss of shrimp landed
3. Shrimp mutation
Although portions on the Gulf were only temporarily closed by the FDA for commercial fishing,
the decrease in the quantity of Brown Shrimp during 2010 in Louisiana was massive.
Figure 2: Supply and Price of Brown Shrimp in Louisiana:
Year
Quantity (landed in millions
Price ($ per pound at the
of pounds)
dock)
2009
34.2
$0.76
2010
17.3
$1.28
Sources: Louisiana Department of Wildlife and Fisheries, National Marin Fisheries
According to Louisiana Department of Wildlife and Fisheries and National Marin Fisheries’
data, there was a 25% decrease in Brown Shrimp landed during this period. Along with the
decrease in supply of Brown Shrimp, price increased from $0.76 to $1.28 per pound at the dock
(Louisiana Department of Wildlife and Fisheries, National Marin Fisheries). Local fisheries took
an economic hit post oil spill. Although in the following years the quantity of shrimps landed
started to increase, local fishers still found many of the shrimp to have been mutated,
III. Supply and Demand Model
Figure 4 demonstrates the effect of the oil spill on the supply of shrimp before and after the oil
spill in the Gulf of Mexico.
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Figure 3: Supply and Demand of Shrimp in Louisiana:
Figure 3 shows the market for Louisiana shrimp before the oil pill and after. S9
represents the supply in 2009 and S10 represents the supply in 2010 after the oil spill. In 2009,
quantity and price equilibrium were set at point a. At point a, the quantity equilibrium is 34.2
millions of pounds, and the equilibrium price is $0.76/pound at the dock. After the oil spill point
a moves to point b because of the decrease in quantity of shrimp. The shortage is seen from point
a to point b. As the market recovers from the shortage the new equilibrium becomes point c,
where Qty landed is 17.3 million, and the price is $1.28/per pound at the dock. This graph shows
a decrease in quantity supplied due to the decrease in shrimp available. This creates a shortage in
the market, since the demand for shrimp exceeds the supply for Louisiana brown shrimp in the
Gulf coast. The quantity in 2009 decreased from 34.2 (landing in millions of pounds) to 17.3
(landing millions per pounds). The price equilibrium in 2009 was $0.76 (per pound at dock) and
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increased to $1.28 (per pound at dock). Since America only imports an eighth of its shrimp from
the Gulf, the local producers and consumers are affected the most.
IV. Conclusion
Figure 4 demonstrates how a shortage of Brown Shrimp has led to a decrease in supply,
which has caused the price of Brown Shrimp to increase. Although in 2011 the quantity of
Brown Shrimp landed increased to 39.3 Million landings (in pounds) and the price decreased to
$0.88, 50% of the shrimp caught in Barataria Bay were eyeless (Kuhns). This was a side effect
from the PAHs that contaminated the ecosystem. Five years later, fishers in the Gulf of Mexico
continued to struggle to catch shrimp at rates pre-oil spill. Anthropogenic forcing has caused
unprecedented damage to our ecosystems by depleting and damaging the Earth’s resources.
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