Term Paper on "What Effect Has Hurricane Katrina Had on the US Economy"

Term Paper 6 pages (2175 words) Sources: 1+

[EXCERPT] . . . .

Hurricane Katrina has had on the U.S. economy so far, and what some of the implications for the future may be. Hurricane Katrina's full effect on the United States' economy may take years to fully develop and understand. Katrina's effect may even be felt worldwide by the time all the affects are analyzed and tallied up. The immediate costs are quite simple to see - skyrocketing fuel costs instantaneously after the hurricane hit, lost jobs, and billions of dollars in aid. However, there are other long-term costs in human life, inflation, and rising interest rates that can only play out over time. One thing is quite certain. The U.S. economy is going to suffer from the affects of hurricane Katrina, it just remains to be seen just how much it will suffer.

Perhaps the largest affect Katrina will have on the economy of the U.S. is in energy prices. Directly after the hurricane hit the Gulf Coast, Americans saw energy prices rise up as much as.50 cents per gallon of gas, and then steady at a small rise over what they were before the hurricane hit. Most Americans did not realize what a great concentration of oil refineries and storage facilities existed in and around New Orleans. Newsweek reporter Robert J. Samuelson writes, "What Wall Street is to money, or Hollywood is to entertainment, the Gulf Coast is to energy. It's a vast assemblage of refineries, production platforms, storage tanks and pipelines -- and the petroleum engineers, energy consultants and roustabouts who make them run" (Samuelson). During the hurricane, many of these facilities were damaged or destroyed, and few of them have come back online to supply energy. Some of them may not be online for years, if ever. Another economic expert notes, "Already there are calls for policy changes to fix the flaws in America's energy infrastructure exposed by Katrina: its tight refining capacity, its dependence on offshore drilling in the hurricane-prone Gulf, its love affair with big, inefficient cars" ("Oil and Troubled Waters"). Even worse, a large percentage of American oil imports enter the country though the same area. Samuelson continues, "Oil production in the Gulf of Mexico accounts for nearly 30% of the U.S. total. Natural-gas production is roughly 20%. About 60% of the nation's oil imports arrive at Gulf ports" (Samuelson). Thus, the fuel American's avidly consume every day is going to cost more, and it is not going to stop costing more any time soon. It will cost more for businesses to produce products, to heat homes and businesses, and to commute back and forth to work. In fact, some experts are predicting American's fuel costs could rise anywhere from 40 to 75% over last year's numbers because of Katrina (Samuelson). Thus, Americans are going to be paying more for goods, services, and fuel, and that will probably have a direct affect on what else they spend money on during the crucial retail holiday season.

The Katrina crisis may also affect the nationwide auto industry. With fuel costs so high, many people are looking for alternatives to low gas mileage vehicles. There has been a lot more public interest in more fuel-efficient vehicles, such as hybrids, which use a combination of gas and electric-powered engines to run more efficiently and save fuel. Already, many auto manufacturers are beginning to advertise their more fuel-efficient models to bring consumers back into auto showrooms. For years, most Americans have been more concerned with large, high-power, low-mileage vehicles with little regard to fuel economy. This energy crisis may finally create the need for more low-cost, high-efficiency vehicles, and force Detroit automakers to find new technologies to help conserve fuel.

There has been another immediate affect of the hurricane on the economy. In August 2005, the unemployment rate for the country was 4.9% - the lowest rate since August 2001 (Samuelson). However, in September, it jumped to 5.1%, and most economists feel that was a direct result of the hurricane and the thousands of jobs lost in the Gulf Coast area. Because many of the industries in the area are affected long-term, these jobs will take a long time to return to the economy. In a region where the economy has historically been poor and unemployment high, this is just another blow to economic development and recovery. The city of New Orleans has had to lay off city employees, from police officers to many other support personnel, simply because they are already running out of government funds to pay them. Tourists and residents are not spending money, and so, the city is not collecting revenues. This trend will certainly continue as revenues continue to drop and costs skyrocket.

There is another major economic aspect of the Gulf Coast that many people forget about, and that is gaming. The Gulf Coast of Mississippi was hard hit during the storm too, and many gambling establishments existed along the coast that added tremendously to the Mississippi economy. For example, several floating casinos were damaged or totally destroyed, and the Hard Rock Hotel and Casino, which was nearly complete and ready to open was damaged so heavily that no one knows when (or if), it will ever open. This has put at least 14,000 casino employees out of work, and probably many more support people who have no jobs because they have no casino and hotel operations to supply and support. It is predicted that Mississippi will lose "about U.S.$500,000 in tax revenue for each day that the Biloxi-area riverboat casinos are closed, and about $140,000 per day for the South River region casinos" (Editors), and many of these casinos are so damaged that there are no estimates of when they will open and resume business. Obviously, this affect on the Mississippi economy will have a ripple effect throughout the region. As Mississippi has to raise taxes or slow spending to make up for the lost revenue, other states and businesses in the area that do business with Mississippi (and Louisiana) will also be affected. It seems that Katrina's after affects may have some positive results for some industries, such as construction, but for the most part, the affects will be negative and very, very long-term.

However, most economists are not predicating a recession as a result of the hurricane. They feel the economy is strong enough to weather disasters. Samuelson notes, "On the whole, the U.S. economy has stood up well to shocks. In the three months following September 11, it actually pulled out of a brief recession" (Samuelson). While a recession may not be imminent, the Federal Reserve Bank did raise interest rates in late October, which many experts did not believe would occur. There is another way a recession could strike the country. The global oil and natural gas industries could take another hit by terrorism or natural causes. Most people agree that the fuel industries have not kept pace with demand, and can no longer crank up production when demand suddenly increases, as it did after Katrina.

There has not been enough building and development of new refineries and storage facilities, and the world is relying on what already exists. Because of this, any other disaster could have even worse ramifications on the national and even global economies. If some other natural disaster or terrorism struck oil refineries, pipelines, or storage facilities around the world, it could rise fuel prices even more, and add to a national or even global recession. Samuelson continues, "If oil prices reach $100 a barrel, the United States would come close to a recession, according to a projection by Global Insight. The same depressing influences would also be felt in Europe, Japan and China, which are all major oil importers" (Samuelson). Thus, the oil industry around the world needs shoring up, and Katrina may be the impetus to create more refineries and storage facilities to avoid further problems like this, while assuring the world continued oil production even during times of crisis.

Another aspect of the hurricane that will affect the economy is the affect it will have on agriculture in the area. While experts feel most crops in the area did not suffer severe damage, the ports along the Gulf Coast are major agricultural shipping terminals, and the movement of agriculture products may be severely damaged by the hurricane. The Wikipedia Web site notes, "The main impact of the storm on agriculture is likely to involve ocean shipping and exports. In 2004, 22% of U.S. wheat exports, 71% of corn exports, and 65% of soybean exports passed through Gulf ports" (Editors). Much of this shipping does not take place until later in the fall, and some of the ports have already reopened, but shortages may occur in these crops around the world if they cannot reach their markets. That will also affect the economic prosperity of the farmers and companies who grow and export the items. In addition, the shrimp and oyster businesses have been hard hit. An economic expert from Forbes… READ MORE

How to Reference "What Effect Has Hurricane Katrina Had on the US Economy" Term Paper in a Bibliography

Related Term Papers:

Hurricane Katrina Public Policy Thesis

Hurricane Katrina: Public Policy

ENVIRONMENTAL ISSUES

Hurricane Katrina represents one of the biggest natural disasters in history. As such, its impact on the environment was significant to the extreme. According… read more

Thesis 4 pages (1337 words) Sources: 4 Style: APA Topic: Weather / Climate / Meteorology

---

Economic Impact of Katrina Impact of Hurricane Term Paper

Economic Impact of Katrina

Impact of Hurricane Katrina on Job Market and Economy Both Locally and Federally

What is the overall impact of Hurricane Katrina on labor markets in affected… read more

Term Paper 20 pages (6883 words) Sources: 20 Style: APA Topic: Economics / Finance / Banking

---

Effects of Terrorism Term Paper

Terrorism

The Effects of Terrorism on the Global Economy since Sept. 11th

Without question, terrorism has dramatic and significant impacts. The human cost can be high, and the damage can… read more

Term Paper 10 pages (2858 words) Sources: 3 Style: MLA Topic: Terrorism / Extremism / Radicalization

---

State of the Economy Term Paper

Andrews, Edmund. "Economy adds 169,000 Jobs but the impact of the hurricane not yet felt." The New York Times. Business News. September 2, 2005. http://www.nytimes.com/2005/09/02/national/nationalspecial/02cnd-econ.html

This September 2, 2005 article… read more

Term Paper 4 pages (1548 words) Sources: 0 Topic: Economics / Finance / Banking

---

Outsourcing of Government Functions a US Study Term Paper

Government Outsourcing

The Outsourcing of Government Functions: a U.S. Study

Outsourcing of government functions is one of the most highly controversial practices of the 21st century. There are several prevailing… read more

Term Paper 35 pages (10988 words) Sources: 25 Style: MLA Topic: Government / Politics

---

View 100+ more related papers  >>