Disaster Ripples

I have been voraciously reading coverage of the disaster that is the aftermath of Katrina. I have been mainly focusing on New Orleans, mostly because it’s one of my favorite places. J was born there. We got married there, in one of the upstairs rooms at Arnaud’s. I have a great fondness for the city, and what is currently happening is greatly distressing.

I’m not going to spend much time on disaster coverage or relief. Other people are handling that better and more capably. I’m just going to make two comments. First, if you can, please help. The effects of this are going to be felt for a long time. The more people that help, the quicker things will approach normal. Second, somebody down in Louisiana needs to sack up, take charge, and start enforcing some law and order down there. I don’t know what the problem is, although I suspect the innumerable agencies involved make the chain of command incredibly convoluted. Gov. Blanco and Mayor Nagin both need to tell their people (NOPD, LA State Police, LA ARNG) to start shooting looters and anyone else interfering with disaster relief and recovery efforts. Get in the way and get shot should be the order of the day. A city of 480,000 people was destroyed in less than 48 hours. It’s not the time to be screwing around with the animals and barbarians who will not be civilized. Remove them from the gene pool.

Instead of making other pleas for help, I’m going to cover some obvious and non-obvious points about why the aftereffects of Katrina are going to be such a bitch. Let’s start with the obvious issue that everybody is contemplating: oil and gas. First up, I note from the Times-Picayune that 8 refineries are shut, with one operating at reduced capacity. All told, it’s about 2.3 million barrels a day of refining capacity. It’s not all gasoline, but enough of it is to make a big difference. Many of the ones that are shut are down because they have no power. They won’t have any power until Entergy gets it back up, and that ain’t happening soon. Immediate impact? The price of gas is going to spike. Expect it to stay high for a while.

Among the many reasons why gas will stay high is the situation at Port Fourchon. Port Fourchon is one of the biggest ports, if not the biggest, to serve the oil industry in the Gulf. Right now, it’s underwater or flattened. The port is starting operations up again, but nothing can come in by land. This limits the operations that can actually occur. It will take a while to get things at Fourchon running back to normal.

Next somewhat less obvious problem is shipping. The Port of New Orleans is freaking huge. The amount of volume that goes through the port is staggering. They get 2,000 ships a year through the port. That’s roughly six a day. Right now, all those ships are stacking up in the Gulf. I just got told this morning that they’re going to try to divert all the Gulf Coast traffic from Mobile and New Orleans into Houston. Mobile ain’t a little bitty port, either. The problem here is that Houston is going to be swamped. Anything that normally goes in or out of NOLA is going to be an issue. Like what, you ask? Well, for starters, and of immediate interest to me, is steel. NOLA handles a large amount of steel, because it has great rail access. Of course, it handles even more grain. Over half of the country’s grain exports go through there. What else comes in through New Orleans? Coffee. The majority of the coffee that enters the US goes into the port. It can’t go somewhere else, because the roasting and processing facilities are in New Orleans. That Starbucks habit some of you have just a got a little bit pricier.

Of course, I am neglecting the biggest effect. Rebuilding and repairing is going to cost an immense amount of money. Once again, the broken window fallacy is rearing its ugly head. It is, as always, a pernicious falsehood. Always remember opportunity cost, people. The money that will be spent rebuilding will not go to anything else. The hit to investment and new growth will be catastrophic.

Many more things to think about are in the ripple effect from the disaster, but that’s enough for right now. Don’t make the mistake of thinking none of the ripples will affect you. If you live in the US, you’ll be affected.


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