By Matthew Yglesia
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.
Not coincidentally, the unemployment rate has soared:
READ full article at Moneybox.