As Hurricane Katrina plowed through the Mississippi River basin, shutting down ports, flooding cities and cutting power lines, economists warned that it is likely to leave a deeper mark on the national economy than previous hurricanes because of its disruption to the Gulf of Mexico’s energy-supply network.
“The typical pattern with a natural disaster like this is that the regional economy gets clobbered but you can barely see it in the national statistics,” said Nariman Behravesh, chief economist at Global Insight in Lexington, Mass. “This time, it is very different because of the impact on the energy infrastructure.”
Already, it is clear that much of the economic activity in the gulf region has indeed been clobbered:
By Tuesday morning, an estimated 2.7 million residents in Alabama, Florida, Louisiana and Mississippi had reported power failures, with many expected to be without electricity for weeks.
Telephone service along the Gulf Coast suffered from severe disruptions because of flooded call-routing equipment and damaged cellular towers.
Casinos have been destroyed in Mississippi and New Orleans; tourism is not expected to revive for months.
The airline-industry trade group Air Transport Association said the nation’s supply of jet fuel had been cut by 13 percent because of Katrina’s damage. Supplies are low in Charlotte, N.C.; in Florida; at Hartsfield in Atlanta; and at Dulles in Washington.
Grain shipments face serious delay: Bunge, the world’s largest oil-seed processor, evacuated a huge soybean operation in Destrehan, La., its main export terminal in the United States.
Food exports and imports that normally flow in huge quantities through regional ports, roads and rail lines are likely to face disruptions for weeks.
What worries most economists is Ka trina’s ripple effect on energy prices. A spike in the price of gasoline just ahead of Labor Day could provide both a real and a psychological blow to spending on other goods and services.
According to Behravesh, in a best- case scenario in which oil and natural- gas supplies fall by 2 percent or less, oil prices are likely to stay at $65 to $70 a barrel for the next couple of weeks while gasoline prices climb to $3 a gallon for a couple of months.
But Behravesh noted that if the disruption of supplies is deeper, gas at the pump could soar to $3.50 a gallon.