Wednesday, August 31, 2005

Economic Implications of Katrina

from Information Clearing House:

The Port of Southern Louisiana stretches up and down the Mississippi River for about 50 miles, running north and south of New Orleans from St. James to St. Charles Parish.

Tthe Mississippi remains the key American shipping route, particularly for the export and import of a variety of primary commodities from grain to oil, as well as steel and rubber. Andrew Jackson fought hard to keep the British from taking New Orleans because he knew it was the main artery for U.S. trade with the world. He was right and its role has not changed since then.

The Port of Southern Louisiana is a river port. It depends on the navigability of the Mississippi River. The Mississippi is notorious for changing its course, and in southern Louisiana -- indeed along much of its length -- levees both protect the land from its water and maintain its course and navigability. Dredging and other maintenance are constant and necessary to maintain its navigability.

It is the fifth-largest port in the world in terms of tonnage, and the largest port in the United States. The only global ports larger are Singapore, Rotterdam, Shanghai and Hong Kong.

Bigger than Houston, Chiba and Nagoya, Antwerp and New York/New Jersey, it is a key link in U.S. imports and exports and critical to the global economy.

It is the key port for the export of grains to the rest of the world -- corn, soybeans, wheat and animal feed. Midwestern farmers and global consumers depend on those exports. Fifteen percent of all U.S. exports by value go through the port. Nearly half of the exports go to Europe.

The United States imports large quantities of crude oil, petrochemicals, steel, fertilizers and ores through the port.
  • The port might become in whole or part unusable if more levees burst.
  • The damage to the river and port facilities probably will not be repaired before the U.S. harvests are at their peak. The effect on global agricultural prices will be substantial and immediate.
  • There is a large refinery at Belle Chasse. It is the only refinery that was seriously threatened by the storm.If it were to be inundated through another levee failure, 250,000 barrels per day would go off line. Moreover, the threat of environmental danger would be substantial.
  • About 2 percent of world crude production and roughly 25 percent of U.S.-produced crude comes from the Gulf of Mexico. Platforms in the path of Katrina were evacuated but others continued pumping. If this storm had followed normal patterns, most production would have beeen back on line within hours or days. It was not a normal storm.
  • A narrow, two-lane highway that handles approximately 10,000 vehicles a day, used for transport of cargo and petroleum products and provides port access for thousands of employees is closed. A closure of as long as two weeks could rapidly push gasoline prices higher. At a time when oil prices are in the mid-60-dollar range, the hurricane has had an obvious effect.

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