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Tuesday, June 18, 2024

Katrina’s Wrath Will Wipe Out Your Pocketbook Too

If gasoline lines and prices have you pinching pennies, your wallet will soon feel Katrina's full force -- from the shingles on your roof to your winter heating bills to your morning cuppa Joe.

If gasoline lines and prices have you pinching pennies, your wallet will soon feel Katrina’s full force — from the shingles on your roof to your winter heating bills to your morning cuppa Joe.

Unlike other disasters, Katrina struck an economic chokepoint, not only for oil and natural-gas and petrochemical products, but for all manner of goods, wherever they’re manufactured.

“The national consequences of Hurricane Katrina will be much broader and deeper than initially estimated by economists, including this one,” University of Maryland forecaster Peter Morici confessed. “The loss of the Port of New Orleans will be greatly compounded by the loss of east-west transportation routes” for everything from commodities to Christmas toys, now arriving at West Coast ports from China.

Katrina’s first punch knocked out 92 percent of oil and 83 percent of natural-gas output along the Gulf Coast, the government’s Mineral Management Service reports.

Experts are still assessing the damage and how quickly nine refineries, plus offshore oil and gas platforms, can be back online. But Ben Bernanke, chairman of President Bush’s Council of Economic Advisers, says Americans should expect to pay at least $3 a gallon for gas for “the next six to eight weeks” minimum.

As for panic gasoline buying that’s led to spot shortages, outages and lines, former Texas oil man Bush advises: “Don’t buy gas if you don’t need it.”

People feeling pain at the pump also will face it at airline ticket counters: United led the way, boosting prices on round trips by $10 to $30. But with jet-fuel prices soaring more than 20 percent in Katrina’s wake, more is at stake than ticket costs: Standard & Poor’s analyst Philip Baggalley sees stiff financial headwinds for Delta and Northwest airlines as they weigh joining United and U.S. Airways in bankruptcy.

Higher air-conditioning costs because of Katrina could show up in September electric bills because power plants burn natural gas. Otherwise, expect a costly winter whether you heat with electricity, natural gas or home heating oil: Even before Katrina hit, the U.S. Energy Department predicted heating bills would be up 16.5 percent.

By week’s end, there was some good news on the energy front:

_ Two of the nine Louisiana refineries hoped to be producing gasoline soon, and the Louisiana Offshore Oil Port _ the nation’s largest import terminal _ reopened, as did a number of oil pipelines to the East Coast.

_ The International Energy Agency will release 60 million barrels of crude oil and gasoline in the next month, following on Bush’s decision to lend refiners nearly 1 million barrels a day from the U.S. Strategic Petroleum Reserve.

But the overall cost of the disaster clearly will be far more than the predicted $25 billion insurance cost, the $10.5 billion federal disaster down payment and disrupted lives and paychecks of more than 1 million Gulf Coast workers and their families.

The price of coffee and bananas, for instance, might go up.

Cincinnati-based Procter & Gamble put out an all-points bulletin and toll-free hotline for more than 500 of its employees at its New Orleans plant, which produces more than half its Folgers and Millstone coffees. P&G spokesman Lars Atorf said the company may move production to plants in Kansas City, Mo., and Sherman, Texas, but “right now our concerns are with our employees and their families.”

Chiquita Fresh, also headquartered in Cincinnati, shipped a quarter of its bananas and fresh fruit through Gulfport, Miss., last year, but no longer: Although its 25 Gulfport employees came through Katrina safely, the facility did not.

So Chiquita redirected shipments to import terminals in Freeport, Texas, and Port Everglades, Fla., because both “are well-positioned … and cost-effective,” Chiquita Fresh CEO Bob Kistinger said. However, the company faces an insurance deductible for the Gulfport facility and business disruption of up to $2 million.

For farmers, “the big question is how long grain exports will be shut down through the Port of New Orleans with fall harvests of corn, soybeans and wheat in full swing the next few weeks,” said Mark Drabenstott, chief economist at the Federal Reserve Bank of Kansas City and head of its Center for the Study of Rural America.

But, he said, “consumers might actually see a little price relief for cereals, grain-fed beef and other goods.”

And even if you never let polyester and other petroleum-based cloth touch your skin, you will feel Katrina’s impact, said chief economist Gary Adams of the National Cotton Council in Memphis, Tenn.

“There is localized impact on the crop where Katrina hit, but it missed the major crop counties in Louisiana and Mississippi,” he said. “The bigger impact will be the pinch energy prices put on harvesting the crop, ginning it and shipping it to market.”

As for moving cotton, the Texas cities of Corpus Christi and Houston likely will benefit from shipping disruptions at New Orleans and Mobile, Ala., because both Lone Star State ports are now among the top trans-shipment points for U.S. cotton.

Homebuyers and owners will take a hit from Katrina, too.

Lumber and plywood prices quickly soared because of the storm, and all construction goods will face higher shipping costs.

And asphalt, shingles, plastic plumbing pipe, insulation and other petroleum-based building products will be more expensive, too, said Associated General Contractors of America chief economist Kenneth Simonson.

Simonson added that most homeowners will see another Katrina-inspired shortage first: “You’ll find it hard to find a contractor or handyman because they’ll gravitate toward the Gulf Coast to find work. They’ll be busy for years because of Katrina.”

(Contact Mary Deibel at DeibelM(at) Cincinnati Post reporters Greg Paeth, Jon Newberry and Alexander Coolidge contributed to this report.)