Katrina's Wake
Like most weekly magazines out there, BusinessWeek's latest features a cover article on the aftermath of Katrina's crash landing on New Orleans. Like the human toll on the city, the economic impact was also underestimated initially. Now we know that the damage is to more than just residential and business properties, but will extend across the US economy due to the damage of the power and shipping infrastructure.
The Gulf represents 17% of the US refining capacity and one-quarter of its daily crude output -- and most of it was hit by Katrina. To get oil production back up, the electrical grid needs to be repaired to power the refineries -- and large number of electrical stations were knocked out. The first priority for electricity will be emergency use -- hospitals, refugee centres, etc. The drop in energy output will ripple across the US economy, increasing prices on just about everything -- if products can be manufactured to meet demand that is. To make matters worse, the worry about rising gas prices that is prompting some people to stockpile gas, may further put a strain on supplies, creating a runaway effect on the economy as gas prices spiral out of control. Of course, it may not turn out to be that bad. There may be some short term pain, but if the grid is back up quick enough, and refineries limp along to full production in short order, the results of reconstruction could create a boost in the economy early in the new year. Right now it's a speculator's dream.
The rising fuel prices will also have an impact on transportation, which could raise the price of some goods being shipped. The ports on the Gulf also represent an important shipping channel [PDF] for many businesses, including farm exporters. If the ports aren't restored quickly enough, farmers could take a beating with this fall's harvest.
Overall, the economic outlook is grim -- especially when viewed in light of the tepid rescue response from FEMA. However, the federal government now seems to have gotten over the initial shock and are responding with new found purpose. If they keep up to the rhetoric, there just might be hope. For the people on the ground, let's hope Bush and Co. aren't just talk.
BusinessWeek also has a "public policy" article, touching on the lessons to be learned from Katrina. It states that the effects of Katrina were "entirely predictable -- and largely preventable." It was well known that New Orleans could never withstand a category 3 hurricane, much less a category 5 -- and it has been known that the power of hurricanes has been increasing in the past 30 years. Lousiana's natural protection has for years been eroded by over development and ecological mismanagement. The state loses 17 coastal miles to every year -- and not much was being done about it. What should the various governments do? Change public policy to focus on the following areas: 1) Restoration of natural buffer zones; 2) Limit development in the vulnerable areas; 3) Get serious about climate change; 4) Increase energy diversity; and, 5) Boost energy efficiency.
Related reading:
The Gulf represents 17% of the US refining capacity and one-quarter of its daily crude output -- and most of it was hit by Katrina. To get oil production back up, the electrical grid needs to be repaired to power the refineries -- and large number of electrical stations were knocked out. The first priority for electricity will be emergency use -- hospitals, refugee centres, etc. The drop in energy output will ripple across the US economy, increasing prices on just about everything -- if products can be manufactured to meet demand that is. To make matters worse, the worry about rising gas prices that is prompting some people to stockpile gas, may further put a strain on supplies, creating a runaway effect on the economy as gas prices spiral out of control. Of course, it may not turn out to be that bad. There may be some short term pain, but if the grid is back up quick enough, and refineries limp along to full production in short order, the results of reconstruction could create a boost in the economy early in the new year. Right now it's a speculator's dream.
Overall, the economic outlook is grim -- especially when viewed in light of the tepid rescue response from FEMA. However, the federal government now seems to have gotten over the initial shock and are responding with new found purpose. If they keep up to the rhetoric, there just might be hope. For the people on the ground, let's hope Bush and Co. aren't just talk.
BusinessWeek also has a "public policy" article, touching on the lessons to be learned from Katrina. It states that the effects of Katrina were "entirely predictable -- and largely preventable." It was well known that New Orleans could never withstand a category 3 hurricane, much less a category 5 -- and it has been known that the power of hurricanes has been increasing in the past 30 years. Lousiana's natural protection has for years been eroded by over development and ecological mismanagement. The state loses 17 coastal miles to every year -- and not much was being done about it. What should the various governments do? Change public policy to focus on the following areas: 1) Restoration of natural buffer zones; 2) Limit development in the vulnerable areas; 3) Get serious about climate change; 4) Increase energy diversity; and, 5) Boost energy efficiency.
Related reading:
Aquatic Ecosystems & Global Climate Change [PDF] -- Potential Impacts on Inland Freshwater and Wetland Ecosystems in the United States
Climate Change 2001: IPCC Third Assessment Report
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