WASHINGTON — With more than 1 million customers in Louisiana and Mississippi having lost power,will take a toll on the energy, chemical, and shipping industries with significant hubs along the Gulf Coast. But the impact on the overall U.S. economy will likely be modest so long as damage estimates don’t rise sharply and refinery shutdowns are not prolonged.
The hurricane is expected to inflict a less severe financial impact than Hurricane Katrina did 16 years ago, thanks partly to a lower insurance industry would hit around $10 billion, far less than the $90 billion-plus from Katrina.. Analysts at Boenning & Scattergood, a financial consultancy, noted that , which likely narrows the area of catastrophic damage. The analysts estimated that losses for the
electricity that any prolonged power outage could have repercussions, at least temporarily, for the oil, natural gas, and chemical companies that have operations along the Gulf. The more extended power remains, the longer those companies struggle to restart their operations.barely moved Monday as oil companies and refiners assessed any damage from the storm. The feNew York Mercantile Exchange price was flat at $68.74 per barrel. Gasoline futures rose 1.2%. Still, Ida, which tied for the fifth-strongest hurricane ever to hit the mainland, left so many customers without
Fewer than 2 million barrels a day of production in the Gulf of Mexico — slightly more than 15% of average output — is shut down. Yet, the disruptions aren’t expected to immediately affect the availability of gasoline nationally because of ample fuel reserves in the system. A week ago, the U.S. Energy Department announced plans to sell up to 20 million barrels from the Strategic Petroleum Reserve, the most significant sale from the federal emergency pool of oil. “There is a lot of crude oil that could backfill for some of these losses,” said Richard Joswick, an oil analyst with S&P Global Platts.
Joswick said that refineries with a combined capacity of 2.2 million barrels a don’t have power,” he added. “If you don’t have power, you can’t run a refinery.” The ports of Baton Rouge, Gramercy, Morgan City in Louisiana, and the Port of Pascagoula, Mississippi, are all closed. The Port of New Orleans was closed but reported that “initial reports indicate no major damage to our facilities.” The Louisiana Offshore Oil Port has also suspended operations., but it could have been far worse: Up to 4 million barrels a day might have had to be turned off had the storm tracked just slightly westward. “That said, they
Early indications are that refineries along the Gulf Coast were spared thethey suffered during Hurricane Harvey in 2017, which caused flooding that inundated several refineries in the Houston area. Yet Jacques Rousseau, an analyst for Clearview Energy Partners, to wait a little longer to see if there is some sort of extensive damage that could take a refinery out for more than just a shutdown-and-restart period.” Over the weekend, Phillips 66 closed a refinery in Belle Chasse, Louisiana, and Exxon Mobil began shutting down production at a refinery in Baton Rouge. On Monday, an Exxon spokeswoman said the refinery didn’t suffer significant damage and would begin restoring normal operations once it knew it would have raw materials and power.
New Orleans lost power on Sunday evening as the hurricane barreled ashore. Localthat it could take weeks tto restore power fully. As the storm approached, offshore oil production in the Gulf was nearly entirely shut down, and crews were evacuated as a precaution. The hurricane and the and onshore refining are occurring just as gasoline demand and other fuels are likely to decline, as it typically does in September and October. That trend, if it holds, could lessen the storm’s effect on prices.
Mostcause minor overall damage to the $23 trillion U.S. economy. Even the hardest-hit regions often recover quickly, thanks to all the money typically spent on rebuilding from the destruction. Still, after Hurricane Katrina, New Orleans’ never regained its strength. In July 2005, the month before the hurricane struck, its metropolitan area had more than 620,000 jobs. It lost 185,000 in September and October that city. Many never returned.
Since then, New Orleans’ recovery has been disrupted by the Great Recession of 2007-2009 and COVID-19, which crushed an economy dependent on tourists. Between Ida and a surge in COVID-19 cases linked to the highly contagious delta variant, the outlook for New Orleans’ fall tourism season has turned from hopeful to bleak. New Orleans had 530,000 jobs in July, down nearly 15% from its United States has risen 9by %.before Katrina. Over the same period, employment across the
“We’re on a long road to recovery,” said D.J. Johnson, who owns the New Orleans Art Bar and the Baldwin & Co. bookstore, both of which sustained water damage from Ida. “We’ve just been hit very, very hard in New Orleans.” Bread on Oak, a New Orleans bakery, will open Tuesday, but only so the owners, Sean and Charmain O’Mahony, can cook up ingredients on a propane grill outdoors. They hope to save some food that would spoil in refrigerators without electricity.
The O’Mahonys are bracing for a hefty bill once they restock everything. And they worry about getting their 30 employees, who are dispersed and without electricity for now,. Sean expects to lose some of them to better-paying on crews making post-Ida repairs around the city. Though such personal losses are many, Adrienne Slack, a vice president at the New Orleans branch of the Federal of Atlanta, called the overall preliminary damage reports “favorable.” “The levee structures are much improved since (Katrina), and they held up very well,” Slack said. “We’re not looking at a city that will be underwater for three weeks.”
She cautioned that the damage assessments would take time and that the local economy can’t return to life until electricity is flowing again. Cellphone service was severely disrupted by the storm. said its network operated at only 70% of capacity in Louisiana and Alabama. AT&T said it was running at 60% of the total Louisiana. On a national scale, Mark Zandi, chief economist at Moody’s Analytics, said the disruptions caused by for annual U.S. in the current July-September quarter by a few tenths of a percentage point. But that financial loss, Zandi said, could be reversed in the of the year due to the rebuilding from the hurricane’s damage that will likely follow.
Citi Investment Research Analysts agreed that subsequent reconstruction would likely offset any growth drag. They said, though, that “inflationary effects may be more persistent as demand for building materials, might last for only a few weeks.“The key channel for Ida to impact the broader economy is energy prices,” Zandi said. “We will have to see how much damage occurred to production in the Gulf and how long that production will stay offline.” “The worst-case scenario is Ida might add 10 cents to 20 cents to the price of a gallon of gas through September,” he said. But he suggested that the increase in pump prices
Likewise, Joswick, the analyst with S&P Global Platts, foresees nothing like theafter Katrina, when the average retail price jumped more than 70 cents in just over a week, according to government figures. “This is a much more modest event,” he said .”We’ll likely recover in a week or two.” Robert Handfield, a professor of supply chain management at State University, sorries that disruptions at petrochemical plants will cut off supplies to plastics factories, which are still struggling to rebound from a February deep freeze in Texas and from supply-chain bottlenecks. “They’re already behind where they should be,” Handfield said. “The inventories are pretty scarce,” Koenig reported from Dallas. AP Writers Kevin McGill and Rebecca Santana in New Orleans, Tali Arbel in New York, Martin Crutsinger and Michael Biesecker in Washington contributed to this .