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The Worst-Case Scenario for the Gulf Coast Oil Catastrophe

President Obama called the oil spill off the Gulf Coast a "potentially unprecedented environmental disaster." How unprecedented and disastrous could it get? Annie Lowrey of The Washington Independent quotes market analyst David Kotok of Cumberland Investors, who offers this as the ugliest scenario imaginable:

This spew stoppage takes longer to reach a full closure; the subsequent cleanup may take a decade. 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. Use your imagination for the rest of the damage. Monetary cost is now measured in the many hundreds of billions of dollars...

Federal deficit spending will certainly rise by tens, and maybe hundreds, of billions as emergency appropriations are directed at larger and larger efforts to clean up this mess.

We expect that the Federal Reserve will extend the timeframe that we have come to know as the "extended period" in the making of its monetary policy.

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

His prediction's last paragraph, however, will make green energy advocates wonder if oil slicks have silver linings:

In addition, the offshore-drilling energy sector will face much-increased and more costly regulation. Deepwater and all offshore drilling in the US has been set back for a generation, just as Three Mile Island set back nuclear power development for decades. No politician can win an election now with a permissive view on drilling. Sarah Palin's "Drill, baby, drill" now condemns her to political marginalization. Off shore drilling has lurched to the top of the political agenda in this November's election cycle.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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