US oil slick could trigger 'double-dip' recession: Analyst

NEW YORK: The massive oil slick threatening the Gulf of Mexico's coastline could wreck the US economy's fragile recovery and lead to a "double-dip" recession, an investment firm warned on Monday.

A market commentary from Cumberland Advisors said the bill from the Deepwater Horizon disaster may ultimately run into hundreds of billions of dollars and leave an economic impact that will be felt for a generation.

Cumberland chief investment officer David Kotok said in a commentary titled "Oil Slickonomics" that the spill had left three likely scenarios for the future: "bad, worse, and ugliest."

Under the worst case scenario, it would take months to plug the ruptured well spewing an estimated 210,000 gallons of oil into the sea every day, Kotok said, leaving a clean-up operation which would take a decade to complete.



"The Gulf becomes a damaged sea for a generation. The oil slick leaks beyond the western Florida coast, enters the Gulfstream and reaches the eastern coast of the United States and beyond," Kotok wrote. "Monetary cost is now measured in the many hundreds of billions of dollars."

Kotok argued that regardless of when the well is plugged, the disaster would lead to an increase in federal deficit spending measured in "tens, and maybe hundreds, of billions as emergency appropriations are directed at larger and larger efforts to clean up this mess."

"At the same time, federal and state revenues tied to Gulf-region businesses will fall," Kotok wrote.

"We do not expect the Fed to raise interest rates at all for the rest of this year, and maybe well into next year. We expect to see the deterioration of the economic statistics for the US to reveal the onset of this oil-slick crisis in May, and the negative impact will intensify during the summer months.

"A 'double-dip' recession probably has been made more likely by this tragedy," he concluded.