Are Hurricane Harvey Damages Improvments Or Repairs?
Hurricane to Price Tens of Billions, simply a Quick Recovery Is Expected
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The vicious storm pummeling the Houston area is probable to rank every bit 1 of the nation'south costliest natural disasters, with tens of billions in lost economic action and property harm across a region crucial to the energy, chemical and shipping industries.
But economists say the region is likely to recover quickly and may fifty-fifty experience a bump in growth from rebuilding.
The Houston metropolitan area, the nation'due south fifth largest by population, accounts for about 3 percent of the nation'due south gross domestic product.
The surface area has a large and growing population and attracts continuous investment in oil-related manufacturing. Information technology is also an of import cog in global merchandise. Texas accounts for about half of petroleum and gas exports, along with most a 5th of chemical exports.
"The economic damage will be moderate, with disruptions to the heart of the nation's refinery and petrochemical industries in August and September," said Robert Dye, chief economist at Comerica Bank.
Texas is often idea of as a centre of oil product, but the Houston area and the nearby Gulf Declension is where much of that blackness gold is turned into refined products similar gasoline, diesel fuel, heating oil, and other distillates.
Mr. Dye said the Texas Gulf coast was home to about 30 percent of the nation's refining capacity, with about one-half of that now shuttered by the storm.
As a result, wholesale prices for gasoline jumped six cents to $1.73 a gallon in trading Monday on the criterion contract that settles adjacent month. The AAA motor club said gasoline was selling for $2.37 a gallon on boilerplate across the land, 4 cents more than a week ago.
On the other hand, crude oil prices barbarous as traders predictable that demand would fall, with fewer refineries open and able to take commitment of the rough.
"It may have weeks for refineries to repair and supervene upon damaged equipment," Mr. Dye said. "Port facilities have also been damaged, and this may effect in an export clogging."
Indeed, with the Port of Houston and Corpus Christi's smaller port directly in the storm's path, a key logistics hub for the south-cardinal The states is set to be out of commission for days, if not weeks.
Nearly half of the exports from Houston consist of resins, plastics, chemicals and minerals, reflecting the concentration of the nation'due south petrochemical manufacture on the Gulf Coast. Major imports flowing through the port include food, construction materials, machinery and retail consumer appurtenances.
Ellen Zentner, chief United States economist at Morgan Stanley, said that although Hurricane Harvey's impact on national gross domestic product in the third quarter might be fairly neutral, "the lagged effects of rebuilding homes and replacing motor vehicles tin can lost longer," providing a lift to gross domestic product in the fourth quarter and beyond.
On the other hand, an extended rise in gasoline prices could take a more immediate consequence. Each x-cent rise in the price of gasoline is equivalent to a $10 billion taxation on consumers, Ms. Zentner said, so "should college prices be sustained, information technology would rob other categories of spending every bit dollars are diverted to filling tanks."
Similarly, a lengthy outage at petrochemical facilities that produce the raw materials for plastic, like polyethylene, could also raise prices for a range of goods, including toys, garbage bags and PVC pipe.
"It's definitely going to cause some dislocations in the wholesale market for plastics components," said Chris Lafakis, director at Moody'south Analytics. "This is a huge hub for petrochemicals."
The economic impact of the storm will not be clear with any degree of accuracy for a while. But given Houston'south commercial importance — and its perch forth a well-trod hurricane zone — economists and others have long taken it for granted that an epic storm would hit the region eventually, and so have a head beginning on the numbers.
Well-nigh two years ago, Ray Perryman, the head of an economic analysis house, looked at the hypothetical economic impairment that would be wrought if storms of diverse sizes and magnitudes striking littoral Texas. The estimates ranged from around $11 billion to $fourscore billion — and the earliest estimates advise this disaster volition be on the upper terminate of that range.
Moody'south Analytics estimates that the damage will be $40 billion to $l billion. The get-go and smaller fix of losses — less than $x billion — will come up from things that exercise not happen: homes not purchased, sales non airtight, gas not bought or shipped. The second and larger set of losses, totaling tens of billions, will come from property damage.
"Things are too preliminary to know at this point, but I would expect Harvey to be one of the 2 about costly in history when all is said and washed," said Mr. Perryman, master executive of the Perryman Group of Waco, Tex.
The damage, while serious and expensive, is probable to exist a fraction of the $130 billion in damage acquired past Hurricane Katrina. Katrina was i of the worst disasters in American history, and the final toll, human and economic, was staggering. When the levees broke, flooding was sudden and firsthand and eventually killed shut to 2,000 people.
The flooding from Harvey appears to be spread over a bigger area that had more than time to mobilize, suggesting that the number of deaths will be far lower, Mr. Perryman said. Hurricane Katrina appeared to have had a greater impact on oil production and refining.
The Gulf Coast of Texas is also more than prosperous and populous than New Orleans. And despite wobbly oil prices, local job growth has accelerated, forth with continued comeback in dwelling sales and construction. The number of Texas oil rigs has been ascent over the past year, giving a big lift to exploration and chemic manufacturing jobs.
And then far, the storm seems to take damaged things that can be replenished or replaced relatively apace. Houston has huge amounts of economic assets that appear to be largely undamaged and are unlikely to be offline for much fourth dimension.
Moreover, factories and refineries are rarely running at full capacity, and equally they come back online, they can ramp up production to meet the backlogs that accumulate. "Businesses have stockpiles and the ability to catch up," said Christopher Thornberg, founding partner of Buoy Economics, a consulting firm.
As the floodwaters drain away and Texas shifts to make clean-upwards style, followed by a mammoth effort to replace what was lost, the daily modes of commerce will shift but not end. Disruptions, deportation and property damage are quickly followed by federal aid and insurance checks.
"This is going to be confusing, but the Houston economy will overcome information technology very apace, just similar other regions," said Mark Zandi, chief economist at Moody'southward Analytics.
In fact, when natural disasters exercise show up in economic information, information technology is ordinarily as a small growth bump a few months after the storm, when rebuilding accelerates and insurance checks are cut.
Source: https://www.nytimes.com/2017/08/28/business/economy/texas-hurricane-harvey-economic-impact.html
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