Katrina's Impact: More Than Pain at the Pump
Sept. 1, 2005 — -- Hurricane Katrina's devastation of the Gulf Coast will be felt in more ways than higher gas and oil prices, analysts say.
Concerns over the damage caused by Katrina to oil platforms, refineries and pipelines along the Gulf Coast have driven energy prices to record highs in recent days. Ninety percent of U.S. oil production along the Gulf Coast was shut down in Katrina's wake, causing crude oil futures to briefly reach $70 a barrel and wholesale gasoline costs to spike to near-record levels of $2.90 a gallon. That led to gas station prices rising to almost $4 a gallon in some U.S. markets.
Some analysts predict the gas prices will only continue to rise in the short term and will stay high through the start of the winter.
"In the Northern tier, we're going to see prices rise 65 cents a gallon from Friday's levels, potentially by this weekend," said Peter Beutel, president of Cameron Hanover, an energy risk-management firm. "In the South, we can see prices rise by as much as $1.10 by the weekend."
However, consumers may feel pain in places other than the pump. Katrina has interrupted exports through the Port of South Louisiana -- the largest in the United States and the fifth-largest in the world. The Mississippi River is the cheapest route for products destined for overseas and imported items. More than half the grain the United States exports leaves from Mississippi Gulf ports hit by Katrina.
Katrina reportedly ruined cotton fields in parts of Mississippi and Alabama and sugar cane in Louisiana, and the price of cotton rose Tuesday on the futures market. As authorities determine the other crops and other materials ruined by Katrina -- and how the hurricane will affect the amount and quality of the crops yielded -- experts say prices on some produce items may rise along with gas and oil.
"It's the same as during those times when you hear about a major hurricane hitting Florida and you see the price of oranges go up," said Kenneth B. Medlock III, research fellow in energy studies at Rice University's Baker Institute for Public Policy in Houston. "You could see the prices of crops in the regions affected by Katrina go up since the amount and quality of production would be affected."