The devastation Hurricane Harvey caused has been described by experts as simply unprecedented. The storm dropped over 11 trillion gallons of water on the state of Texas alone, and FEMA expects over 450,000 of the state’s residents to seek help from its agency.
Additionally, the storm is also leaving a plethora of economic problems in its wake that could have a permanent impact on the American economy.
Gas Production and Prices
Given the fact that the Gulf Coast accounts for 17% of total U.S. crude production and nearly 50% all the nation’s refining capability, it is not surprising that Harvey would have an outsize impact on gas and oil prices.
The cost of gas at the pump is set to rise by up to 20 cents per gallon according to experts following the damage caused by the storm. Naturally, the Southeastern and Mid-Atlantic states would feel the impact more than Northern states as prices in this area are expected to go up by 10 to 20 cents. At the same time, gas prices in the Great Lakes area and Midwest could rise by anywhere from 7 to 15 cents per gallon.
These rising costs may seem small, but are sure to be felt by struggling businesses, entrepreneurs and consumers throughout the country. They will also most likely be felt by consumers as the cost of food and goods rise due to the increased cost of transporting these items to grocery stores and supermarkets.
How long the rise in gas prices would last remains unknown. Some predict that prices could go back to normal within days; however, this may not necessarily be the case. Pumping and refining facilities that have been shut down may need repairs before they can be reopened. What is more, those who would repair and run the facilities may not be able to return to the local area quickly due to the ongoing flooding.
Workers will also need time to rebuild their own homes and lives after the devastation. It could be weeks or even months before prices go back down to their pre-Harvey levels.
Cost of Rebuilding
Current estimates set the cost of damage between $20 to $40 billion. This would make Harvey one of the five most expensive storms to ever hit the United States. However, the fact that Harvey has affected the fourth largest city in the nation and is remaining long enough to dump even more water on the surrounding area could very well result in this storm becoming the most expensive natural disaster in the country’s history.
Up to 50 counties were affected by the storm, and more rain is expected in the next couple of days. While engineers, law enforcement agencies and government agencies are doing everything in their power to evacuate residents, restore power and critical infrastructure and prevent looting, it will be years before all the damage is repaired.
Additionally, there is the real possibility that those who lost everything in the storm will simply move their homes and businesses elsewhere, causing long-term negative consequences for business activity in the city.
Effect on the Stock Market
Only one in six homeowners in the affected area have flooding insurance; even so, insurance companies are feeling the pain. Stocks from well-known insurers such as AIG, Allstate and Progressive are declining even though some experts have publicly stated that the companies do have enough capital on hand to handle the expected surge in compensation claims.
The fact that the Dow Jones industrial average fell 26 points is being credited in part to the aftereffects of Harvey; however, there are likely other factors at play as well, including political infighting in Washington and recent FED activity.
On the other hand, some companies are expected to actually benefit in the wake of Harvey’s aftermath. Oil refinery stocks are rising in value even though crucial operations in the gulf may not reopen for weeks or even months. The fact that the cost of gas has risen due to a reduction of supply is spurring these stocks onward even though stocks from gas and oil companies such as Exxon Mobile have lost some value.
While it is currently unknown just how much damage Harvey will cause, the fact is that this storm is set to be one of the most damaging natural disasters to befall the nation. The pain caused in its wake will be felt most by those who lived in the affected area but the entire nation will be impacted in one way or another.
Regards,
Ethan Warrick
Editor
Wealth Authority
