Sunday, August 31, 2008
The economic ramifications of Hurricane Gustav
Around three years after Hurricane Katrina hit the south, another hurricane is poised to do the same. One of the three inputs that determines economic outcomes is environmental factors, of which natural disasters, such as hurricanes, are a part of. Hurricane Katrina, three years ago, severely hurt the U.S. economy. According to this article, it was actually the costliest natural disaster in history. So, it would be assumed that Hurricane Gustav would also cause drastic problems in the economy. But, according to the article Wall Street hopes economy can weather storm, the economy actually seems to be holding up a lot better than expected. In addition to the reasons that the article lists on why this could happen, I think that another factor is that there is a lot more warning about this hurricane than Hurricane Katrina, as well as more of an understanding of what to do during the storm and afterwards.
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also, anyone who took out disaster insurance, which has been growing in popularity within insurance companies, will be calling on their coverage provider. This means the insurance companies who have issued out "hurricane insurance" will loose money paying out all the claims that are about to come in
This Hurricane is also raising gas prices because big oil companies in the Gulf of Mexico have begun shutting down for the hurricane. gas prices jumped even before the pipes were closed because of uncertainty about the future of gas production in the Gulf of Mexico (hurricane Katrina took weeks to recover from). Even though the companies say that their production should not be severely affected be the storm, its interesting that people assume the worst and gas prices rise in response to these fears.
I agree about the reason potentially being that there was actually a warning before Hurricane Gustav. And maybe I am alone in this thought, but I believe the economy drop after Katrina may be IN PART because the American public was extremely dissatisfied and untrusting of the government after the way the Katrina situation was handled. Some of the grey area stories that didn't quite make the news headlines were horrifying to me, at least. Certainly enough to second guess what I was going to do with my money.
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