First, let me begin by quoting the always useful Stratfor (I can't subscribe, because its too expensive, but for those who can afford the $400 a year subscription price tag, it is an essential source on world politics and the global economy) theorizing about what a "worse case scenario" would entail (and, as has in fact unfolded or still is unfolding). I apologize in advance for the length of this citation, but I truly believe the information it provides is vital and is simply not being reported widely enough:
Courtesy of Information Clearing House:
Now, of course, Katrina was "only" a category 4 hurricane, but since New Orleans's levee system is (was) at best prepared to handle a category 3, the point is mute right now. Needless to say, the world's 5th largest port - which is a key entrepot in the incredibly stressed world energy market, to boot - has been rendered inoperative. It is anybody's guess when - if - ever it will function again, considering that conservative estimates suggest the city will be uninhabitable for at least a month and most likely longer. New Orleans as the world has known it will never exist again.
I don't know much about New Orleans environs at this point, but needless to say much of New Orleans suburbia and the small towns in low lying southern Lousiana are experiencing conditions not dissimilar.
And I haven't even got to the Mississippi coast. Which I will now do. The center of the hurricane actually hit this area, which was part of the reason people thought New Orleans had experienced a "near miss" yesterday. While this area does not have a city the size of New Orleans, it does have a number of small cities which have also been virtually destroyed. For example, Gulfport, which has a population of 71,000. Right now, news reports are saying that as much of 90% of Gulfport has been destroyed by flooding and wind damage. Likewise, the city of Biloxi - 50,000 - was hard hit. So far, we know at least 30 people died there when an apartment building collapsed. As is the case in New Orleans, we really don't know how bad the human and material toll is, but rumors are now circulating that the death toll is "at least" several hundred and quite likely in the 1000s. While Gulfport and Biloxi are not ports on the magnitude of New Orleans, they nevertheless are significant ports located at a key point in the global economy, connecting the Mississippi River to the massive Gulf of Mexico oil and gas fields. And needless to say, these ports aren't going to be operating for the foreseeable future. In other words, the very points that would be counted on to pick up the slack for New Orleans are also inoperable in the near future as well.
And on to Alabama. While Alabama was not hit as badly as Louisiana or Mississippi, it did experience significant damage, with close to a million residents losing power and the port city of Mobile being innudated under 10 feet of water. While only 2 death have been so far reported in Alabama, the infrastructural damage is considerable. In particular, the city of Mobile and its port are likely severely damaged and probably inoperable at least in the near future.
And I haven't even talked about the damage to the oil and gas infrastructure in the Gulf of Mexico, which almost certainly will be significantly disrupted in the near future, and probably longer. Reports are now coming in that the initial effect underestimated the damage done. Indeed, to give a hint of what lies in store, an oil company executive discovered during a reconnaisance flight one of his rigs seventeen miles from its original location. I don't think regular readers of this blog will need much help figuring out what the implications of this could be. Indeed, tonight in Seattle, I spied gas stations selling 87 unleaded for $3 - this is the first time in my life I have ever seen this in the United States. Now, Seattle - and Washington state more generally - tend to be on the high side in terms of nationwide gas prices, but from what I saw on my trip to Pennsylvania and Virginia this summer, this isn't far off what the rest of the country is experiencing with probably worse in store. And I'm not even mentioning natural gas.
Here is some useful information on the potential implications, based (again I stress) on only what we know so far from the libertarian Lew Rockwell Institute's blog:
If that is not bad enough, the Henry Hub in Louisiana is closed too. It is the main -- I think possibly the only -- point where US Gulf natural gas flows into the continental US natural gas network. The folks at the New York Mercantile Exchange are having an emergency meeting about this (the Henry Hub is the price point for NY natgas futures). A lengthy closure will cause problems for traded natural gas.
And could cause a major crisis for natural gas in the US as soon as this week if it closed too long. With all the focus on oil, no one has paid much attention to the fact that natural gas production in North America has been declining for the last several years and, aside from the deepwater Gulf of Mexico, the Alaska North Slope and the McKenzie Delta (the gas from Alaksa and northern Canada will likely not its way south before 2010), there is not enough gas out there to meet rising demand (especially for power generation). Americans are heavily dependent on the Gulf for natgas and oil, and lengthy outages or severe damage to capacity will only tighten the squeeze on energy markets.
Anyway, here is a fairly useful summary from The NY Times about what we know for sure so far. But as I suggest above conditions in the region are currently so catastrophic that we probably won't know the full toll for some time to come.
Let me conclude by saying this: this is a world-historic event that at least in the context of American society is going to be seen as the second most important (one off) event behind 9/11 of the first decade of the new millenium by future historians. While the Asian Tsunami of last December was surely more devastating in terms of human life, I think that in economic terms, Hurricane Katrina is more significant because of some of the reasons I site above. But make no mistake. This is not just an "average" news story.
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