09/02/2005: "Katrina—A Name to be Long Remembered"
Although reports are still coming in on the number of lives lost and the amount of destruction wrought by Hurricane Katrina in various parts of the affected states bordering the Gulf of Mexico, there is no doubt that the last week of August 2005 will be long remembered as a unique time in American history.
Texans have joined the world in viewing the shocking video of flooding and devastation in parts of Florida and in southern Louisiana, Mississippi, and Alabama. Many people are still avidly trying to absorb newspaper, television, and Internet accounts of the dramatic manifestation of nature’s tremendous power with wind and water.
Everyone is understandably saddened by the hundreds of tragic deaths and the difficult adjustments now demanded of so many families, most who have lost all of their possessions. The suffering and reevaluations individuals and families are enduring will probably leave lasting emotional scars.
Of particular concern to many people, also, are the financial burdens those southern states are experiencing and the expected impact the hurricane’s havoc will have on their economies. Although some time will be required to determine the full extent of the damages, when it is finally added up, the total undoubtedly will be in the tens of billions of dollars or even higher. Katrina could possibly become the costliest storm the insurance industry has ever experienced.
A unique feature of this hurricane is its effect on people far beyond those living in or near its destructive path, particularly with regard to gasoline prices. The jump at the pump will be clearly evident across the US over the Labor Day weekend as prices are expected to soar dramatically. Its timing and location give it a dimension beyond those of other natural disasters.
Although the demand for fuel will most likely decline somewhat later in the fall, the price of crude oil is not anticipated to see a significant drop for a while. If Katrina has caused major damage to the US oil and refining assets, the industry, which was already struggling to meet needs, will be further strained.
Operations in the Gulf of Mexico usually provide some 1.5 million barrels per day of crude oil, a figure that represents almost 2% of global oil production. Hurricane Ivan, which struck last September and which was much less powerful than Katrina, wiped out about 45 million barrels of US output in the Gulf over a six-month period.
Until the full extent of damage to oil drilling installations and refineries is calculated, it would be imprudent to forecast changes or the length of time required for the energy sector to return to normal. The offer by Saudi Arabia to immediately increase its oil production could provide some relief as will any release of our nation’s strategic oil reserves. Even so, the price tag for fuel over the short term will probably remain relatively high.
As we have learned from previous hurricanes, especially those that struck Florida last year, Americans have a unique resilience when faced with dire circumstances. The response from all over the country has been highly positive as people not directly affected by the situation want to help those who need so much assistance at this time. In fact, if history is a guide, even a storm of this magnitude will not deter overall economic expansion to any substantial degree, and the rebuilding process will bring a notable stimulus. None of that, however, can diminish the human tragedy, which is and should be our primary focus.
Our nation’s economy is strong, and we have extensive experience in rebuilding myriad kinds of structures as well as roads, bridges, and even levees. As we seek to achieve these objectives, various individuals and organizations will be called upon to go the extra mile.
Because of their particular capabilities, industrial sectors involved in the rebuilding and restoration of those devastated areas will probably realize economic benefit from their efforts in the coming months and years. That is a topic for another time. Our nation is fortunate to have so many able and willing to meet challenges such as those wrought by Katrina, a name that will be hard to forget.