By Matthew Yglesia
Moneybox
A blog about business and economics
Here's something you probably didn't know: The U.S. Virgin Islands are experiencing a catastrophic recession.
According to data released yesterday by the Commerce Department's Bureau of Economic Analysis, real GDP on the islands declined 13.2 percent in 2012 after falling 6.6 percent in 2011. That's terrible.
But it also seems traceable to problems at just one company, the
Hovensa oil refinery—a joint venture between Hess and the Venezuelan
state oil company that refines
Venezuelan crude. The global recession of 2008-09 took a hammer to oil
consumption in rich countries, and even as U.S. output has surpassed its
pre-crisis peak, U.S. oil consumption still hasn't. And while demand
growth has shifted to the developing world, developing countries have also built new modern refineries. That led Hovensa to pile up $1.3 billion in losses over the course of 2009-11
before shutting down in 2012. The refinery was the largest private
employer on the island, so its shutdown—paired with an associated
decline in governmnet spending as refinery-related tax revenue fell—has
driven the Virgin Islands into their funk.
