The Marketplace Report: Katrina's Economic Impact
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
Hurricane damage to oil production in the Gulf of Mexico may prompt the Bush administration to tap the nation's strategic oil reserve. The Energy Department says it will consider requests from US refiners who face shipment delays after the hurricane. For more on this, we're joined by Bob Moon from the "Marketplace" news bureau in New York.
Bob, welcome back. And how much of an impact is the hurricane going to have on energy supplies?
BOB MOON ("Marketplace"): Hi, Alex. Hurricane Katrina took aim at the very heart of oil production off the Gulf Coast. Normally about one and a half million barrels of US crude are pumped out of the Gulf every single day. That's a quarter of the nation's domestic oil output, and it makes up almost 2 percent of global production. Well, we know that more than 40 percent of that production had to be shut down as Katrina approached, and we could see that number go way up today as more operators report to the government on how production has been affected.
There is some concern today that the storm may have made a direct hit on a couple of key offshore ports where oil is loaded onto the ships. Crews are hoping to get out as soon as the worst of the storm passes for some helicopter fly-bys to see just how bad the damage really has been to the big oil platforms out in the Gulf.
On shore, there is at least some hope that some of the big refineries may have been spared the worst damage by the storm's slight jog toward the east. Over the weekend, refinery operators have reported that at least eight facilities with a combined capacity of 1.8 million barrels a day had been shut down. Those are refineries. Remains to be seen just how quickly they can be brought back online.
All this triggered a surge to a new all-time record high today in the price of oil, above $70 a barrel. That was briefly this morning here on the New York Mercantile Exchange. But those prices have eased off a bit as the oil markets wait to hear how bad the damage really has been.
CHADWICK: What about other possible effects, just general shipping along the Mississippi River? Is that being disrupted?
MOON: Yeah, at least in the short term, you have the potential for delays in, for example, grain shipments down the Mississippi from the Midwest. I remember back when Hurricane Andrew hit just to the west of New Orleans back in 1992, I drove across miles and miles of a flattened sugarcane crop in south Louisiana. This time the hurricane hit to the other side of New Orleans, so that damage won't be as bad. But hurricane-force winds did stretch out over a much wider area this time, so that's another area that we'll be looking at.
CHADWICK: And this is going to cost the insurance industry something, isn't it?
MOON: Yeah. A company called Eqecat does computer modeling of the possible damage, and it estimated that the storm could cost insurers as much as $25 billion. That would make it the costliest hurricane on record here.
Today in the "Marketplace" newsroom, we'll be looking further into how the hurricane will be affecting oil prices.
CHADWICK: Thank you.
Bob Moon of public radio's daily business show "Marketplace" from American Public Media.