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Economy braced for Katrina's fallout

Published: 10:10AM Wednesday August 31, 2005 Source: AAP

The United States can expect major economic disruption which will ripple worldwide after Hurricane Katrina's furious winds and rain shut down ports and hammered oil production, analysts say.
  
With towns flattened, Mississippi ports blocked, coastal refineries starved of crude and oil production in the Gulf of Mexico virtually at a standstill, Katrina has had a devastating effect.
  
Total economic losses from one of the most powerful hurricanes in US history could go as high as $US35 billion ($NZ50.8 billion), said Peter Zeihan, senior analyst at Stratfor, a global economic and political consultancy in Austin, Texas.
 
"The big question is how much the rivers and ports have been silted up. It could be fixed in two days, it could be two months," he said.

"If it's the longer end, we're going right into the grain harvest. The US is the biggest grain exporter in the world, and most of those exports go down the Mississippi. So food and feed prices could soar worldwide," he said.
  
"And imports of oil and all sorts of other goods will be blocked going upstream. Domestic prices will jump as a result."
  
The US Coast Guard ordered all ports shut from Morgan City, Louisiana to Pensacola, Florida ahead of the storm, which battered the coast as it roared ashore early Tuesday just east of New Orleans.
  
Two of the Louisiana tanker terminals affected - Port Fourchon and the Louisiana Offshore Oil Port - combined handle more than 20% of all the crude oil imported into the United States.
  
Port Fourchon's director, Ted Falgout, said he feared the sprawling facility's entrance channel had been blocked by tonnes of sediment dumped by Katrina.
  
Access highways have also been damaged and nearby ports that might have taken up the slack are inoperable, he said.
  
"If we cannot get the facilities open and the vessels moving to carry the goods and services necessary to turn the oil fields back on, it could mean a very large impact to this country's energy supply," Falgout said.
  
Oil prices have surged to record highs above $US70 ($101.6) a barrel in the storm's wake.
  
Global trade in a range of other goods and commodities, including grain, cotton, soy, steel, fertiliser and ores, will also be affected.
  
In the Gulf of Mexico, three oil platforms were reported missing by their operators and at least nine rigs were said to be adrift after Katrina barrelled through the pivotal oil-producing region on its way to the US coast.
  
The government said it was reviewing an industry request to tap into its 700-million-barrel Strategic Petroleum Reserve to keep supplies flowing to hard-hit refineries on the Gulf Coast.
  
Wachovia bank economists said the hurricane would dent third-quarter US growth.
  
"With as much as 10% of the nation's refinery capacity now expected to be closed for two weeks or more, there will be considerable lost energy output during the third quarter," they said in a research note.
  
Industry experts said insurance losses from Katrina could top payouts that followed Hurricane Andrew in August 1992, which caused nearly $US21 billion ($30.5 billion) in damages in today's money.
  
Disaster modelling consultancy AIR Worldwide estimated Katrina could cost the insurance industry between $US17 billion ($24.7 billion) and $US25 billion ($36.3 billion).
  
Merrill Lynch economist David Rosenberg said past hurricanes had actually benefited US growth thanks to reconstruction spending in affected areas.
  
But he warned: "What makes this hurricane different from others in recent history is the impact the storm has had on energy prices."
  
If oil prices hold at their sky-high levels, "it has the potential of shaving about $US30 billion ($43.5 billion) from US economic growth", Rosenberg said.