Sun Sentinel Palm Beach Edition
Texas will need tens of billions in federal aid.
Storm’s flooding could cut region’s output by $7B-$8B
DALLAS — Flood damage from Harvey is likely to reach into the tens of billions of dollars and the storm is expected to cause the region’s economy to shrink, at least in the near term.
Harvey is swamping refineries along the Gulf Coast, leading to higher gasoline prices. Wholesale gasoline futures on Monday climbed 5 cents, or 2.7 percent, to $1.71 a gallon.
Harvey, which hit the coast as a Category 4 hurricane, will likely affect the South Texas economy for months.
Mark Zandi, chief economist at Moody’s Analytics, predicted that the region’s economic output will be cut about 1 percent, or $7 billion to $8 billion.
Here’s a look at the effects on key industries:
Prices are expected to spike over the next week or more as about 10 refineries representing more than 15 percent of the nation’s refining capacity are shut down.
When water recedes, prices will fall more slowly than after other storms that hit the refinery-rich Gulf Coast, like Hurricane Ike in 2008, said Rick Joswick, an analyst with S&P Global Platts’ PIRA Energy.
Nearly 3 billion barrels of the 18 billion U.S. daily refining capacity has been knocked out. Most of the shut-downs have been precautionary.
But the slow-moving nature of the storm means it could cause shutdowns to linger and leave more-lasting damage, said Goldman Sachs analyst Damien Courvalin.
Exxon Mobil closed its huge Baytown refinery, which lies along the Houston Ship Channel, 25 miles east of the city. The plant can handle up to 584,000 barrels of oil per day.
Several other refineries closed, including a Royal Dutch Shell plant along the ship channel.
Houston’s two big airports are expected to remain closed to all but relief flights until later this week, as runways were flooded and roadways in and out were under water and at times impassable.
More than 1,600 flights on Monday were canceled, the bulk of them at Bush Intercontinental Airport and Hobby Airport, according to tracking service FlightAware.com.
Bush Intercontinental, a hub for United Airlines, isn’t expected to reopen until Thursday, according to the Federal Aviation Administration.
Property damage from Harvey will likely be counted in the tens of billions of dollars. Damage from flooding will far outstrip wind damage, said analysts for Risk Management Solutions.
Don Griffin, a vice president at the Property Casualty Insurers Association of America, said insurance companies are well capitalized and prepared to withstand the cost of wind claims from Harvey but the federal program may need to borrow more money from the taxpayers.
Many businesses in the Houston area are flooded, including banks.
“In areas without power, it is back to a cash-only economy in terms of securing food, medical supplies and other necessities,” said Greg McBride, chief financial analyst at Bankrate.com.