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Page added on September 3, 2017

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If $26 oil doesn’t do us in, 52 inches of rain won’t either

Consumption

Frenzied motorists scrambled to find gasoline in Dallas-Fort Worth as reports of imminent shortages spread on social media, fueled by refinery and pipeline shutdowns along the energy-rich Texas Gulf Coast.

Storm-weary homeowners and renters by the thousands fled water-filled properties with whatever they could carry, not knowing what would be left of their belongings when floodwaters receded.

Restaurants, boat storage centers and other small businesses battered by winds topping 130 mph emerged as twisted heaps of metal and plywood in coastal towns where Hurricane Harvey began its roughly 400-mile path of destruction.

Those searing images from Harvey’s time in the spotlight also represent the layered economic impact left behind by one of the nation’s worst natural disasters. Just as the stubborn storm refused to go away for nearly a week, it’ll take months for its economic toll to fully unfold.

Here’s where that damage stands nine days after Harvey made landfall.

Overall impact

As the storm moved up the coast from Corpus Christi in South Texas to Lake Charles in Louisiana, predictions of its dire consequences quickly rose from $10 billion into the tens of billions.

By the end of its run, the storm’s projected tally was on par with the country’s previous costliest natural disaster, Hurricane Katrina.

AccuWeather founder Joel Myers forecasts Harvey and its aftermath will end up costing $190 billion — the highest estimate to date. He takes into account factors not considered in other predictions, everything from supply chain interruptions to spoiled food.

“This is the costliest and worst natural disaster in American history,” Myers said in a video posted on the forecasting service’s website. “Parts of Houston … will be uninhabitable for weeks and possibly months due to water damage, mold, disease-ridden water and all that will follow this 1,000-year flood.”

Texas Gov. Greg Abbott said he expects disaster relief needed for rebuilding to exceed $125 billion, topping Katrina. Federal spending to restore New Orleans post-Katrina has been estimated at $120 billion.

Other economists are more conservative in their estimates. Risk-modeling company RMS puts the damage at $90 billion. Moody’s Analytics estimates the toll will be $86 billion to $108 billion.

Irving-based Exxon Mobil Corp. operates the second-largest refinery in the U.S. in Baytown, Texas. It was among the coastal refineries that shut down during Hurricane Harvey. (Tom Fox/Staff Photographer)
Irving-based Exxon Mobil Corp. operates the second-largest refinery in the U.S. in Baytown, Texas. It was among the coastal refineries that shut down during Hurricane Harvey.
(Tom Fox/Staff Photographer)

Energy industry

With Texas’ Gulf Coast serving as a global center for the oil, gas and chemical industries, the temporary shutdown of major refineries and pipelines was most immediately visible to consumers at the gas pump.

By Friday afternoon, the spike in gas prices drove the national average to $2.56 a gallon — an increase of 18 cents in a week, according to GasBuddy. Travel club AAA said prices jumped at least 10 cents a gallon in 24 hours in Texas, Ohio, Georgia and the Mid-Atlantic states.

The nationwide average was already higher than most experts predicted as a worst-case scenario when flooding from the devastating storm began knocking out refineries, including the nation’s largest in Port Arthur. The low-lying coastal region supplies nearly a third of U.S. oil refining capacity.

Exxon Mobil and Valero also temporarily closed major refineries in Baytown and Corpus Christi.

Two leading price-forecasting analysts, GasBuddy’s Patrick DeHaan and Tom Kloza of the Oil Price Information Service, now see the national average peaking as high as $2.75 a gallon in the next few days.

After panic over shortages spread across Dallas-Fort Worth Thursday and into Friday, some North Texas gas stations raised prices above $3 a gallon. Motorists wanting to top off their tanks before the traditionally travel-heavy Labor Day weekend waited in long lines and drained many stations of their supplies.

Lines could pop up next in states in the Southeast and East Coast because those areas get much of their gasoline from the Colonial pipeline that taps into refineries in Texas and Louisiana. That pipeline wasn’t expected to resume normal operations until Sunday. On top of that, analysts said some gasoline from the Northeast is being diverted to Florida, and gasoline exports are contributing to higher prices.

How long this lasts will depend on how quickly the oil giants can bring refineries back to full capacity and get new supplies to stations.

Motorists wait in line to get gas at a Costco at Sam Rayburn Tollway and I-35 in Lewisville, Texas, on Thursday, Aug. 31, 2017. (Vernon Bryant/Dallas Morning News)
Motorists wait in line to get gas at a Costco at Sam Rayburn Tollway and I-35 in Lewisville, Texas, on Thursday, Aug. 31, 2017. (Vernon Bryant/Dallas Morning News)

Real estate & construction

Harvey is going to further pinch Texas’ already tight housing market. Storm damage will add to labor shortages of labor and push up prices on building materials as Gulf Coast communities recover.

Thousands of homes and apartments were either destroyed or damaged. Before the storm, Texas was the country’s largest homebuilding market.

Now, builders and construction workers who were already struggling to keep up with the state’s demand for new housing are going to face the challenge of replacing and repairing what Harvey wrecked.

“The counties in the state disaster area represent approximately 4 percent of nationwide single-family construction and 32 percent of Texas new home construction,” said Robert Dietz, chief economist for the National Association of Home Builders.

Real estate research firm CoreLogic estimates damage to homes in the 70 affected counties in Texas and Louisiana will end up costing $25 billion to $37 billion. Most of that will be uninsured losses from wind and flood damage, and storm surge.

Damage to apartment complexes, office buildings, retail stores and industrial facilities in the Houston area will add up to as much as $55 billion, according to CoStar Group Inc. It determined that more than a quarter of all commercial property in the Houston area was affected by flooding.

United Airlines idled planes at George Bush Intercontinental Airport in Houston. (Tom Fox/The Dallas Morning News)
United Airlines idled planes at George Bush Intercontinental Airport in Houston. (Tom Fox/The Dallas Morning News)

Land, sea & air travel

Harvey’s torrential rains forced the closing of Houston’s two major airports and the all-important Port of Houston for nearly a week. Transportation into and out of the nation’s fourth largest city was snarled and limited by flooding that swamped highways in all directions.

“There’s nothing being sold, nothing being manufactured and nothing being shipped in a city with a $500 billion economy,” Patrick Jankowski of the Greater Houston Partnership said at the height of Harvey’s stall over the city. “Nothing is happening in Houston except rescues and people watching people get rescued.”

The Port of Houston, the second busiest in the U.S., is a 25-mile network of public and private terminals, refineries and chemical plants that use the Houston Ship Channel to move products around the world through the Gulf of Mexico.

On Friday, the port reopened terminals to truck traffic, even though shipping remained “restricted because of the swift current in the channel,” said Port Commission Chairman Janiece Longoria. “Opening our terminals also reinforces … that it is important to resume normal operations as soon as practicable.”

The Port of Corpus Christi, which typically moves $100 million worth of goods a day, and the Port of Galveston, a popular launch for Caribbean cruise ships, also have reopened. More than 5,800 passengers on three Carnival cruise ships were expected to return to Galveston Friday and Saturday after being diverted to New Orleans during the storm.

Passenger flights into Bush Intercontinental and Hobby airports also have resumed.

Consumer spending and auto sales

Harvey essentially shut down retail spending in southeast Texas, prompting economists to predict a drop in the nation’s economic growth for the July-September quarter.

Forecasting firms IHS Markit and Macroeconomic Advisers estimate the storm will shave 0.3 to 1.3 percentage points off third quarter GDP. Some of that is likely to be recovered later in the year as government-funded construction and repairs get under way.

“Looking ahead, the impacts of Hurricane Harvey are weighing heavy in our calculations of real consumer spending in the third and fourth quarters,” said IHS Markit Executive Director Chris Christopher Jr.

Flooded cars near the Addicks Reservoir in Houston sit as floodwaters from Tropical Storm Harvey. (AP Photo/David J. Phillip)
Flooded cars near the Addicks Reservoir in Houston sit as floodwaters from Tropical Storm Harvey. (AP Photo/David J. Phillip)

One spending category that expects to see a post-Harvey surge is the automotive sector.

After an initial lull period to take stock of the devastation and reopen dealerships, the boost to sales of pickups and new cars over the next several months could be significant. Harvey may have done more vehicle damage than any storm in U.S. history, destroying as many as half a million autos, according to Cox Automotive.

“We think we will see sales in the area increase pretty quickly and we’re confident that will boost the entire market,” said Michelle Krebs, an analyst for Autotrader. “It’s a big truck and SUV market already, so we expect sales of those vehicles will be strong.”

To meet replacement demand in Texas, carmakers may have to crank up assembly lines just as they did after hurricanes Sandy and Katrina. Mark LaNeve, Ford’s vice president of U.S. sales and marketing, said Friday the period following Katrina is the best proxy the company has for what may happen next.

“The month or two immediately following were weak, as people were recovering and we were trying to get the dealers back on their feet and backfill inventory,” LaNeve said. “But then we saw a very dramatic snap-back in maybe the 60- to 100-day window following it where consumers and companies were replacing their vehicle needs.”

Vehicle sales rose 49 percent in the New York region the month after Sandy, said Jonathan Smoke, chief economist at Cox, the parent company of car-shopping researchers Kelley Blue Book and Autotrader.

The 300,000 to 500,000 cars and trucks that Houston may have lost likely exceeded the 325,000 new vehicles sold in the region during the last 12 months, Smoke said. By comparison, the New York area lost about 250,000 autos related to its 2012 storm.

The Houston metro area ranks eighth nationwide in registered vehicles, with 5.6 million in operation, and accounts for about 2.3 percent of U.S. new-vehicle sales.

The west side of the downtown Houston skyline following Hurricane Harvey, Wednesday, August 30, 2017. (Tom Fox/The Dallas Morning News)
The west side of the downtown Houston skyline following Hurricane Harvey, Wednesday, August 30, 2017. (Tom Fox/The Dallas Morning News)

Outlook for recovery

The economic blow from Harvey came just as Houston was beginning to regain its footing after oil prices had tumbled into a freefall in mid-2014, bottoming at just over $26 a barrel in January 2016, forcing widespread cutbacks in the energy industry.

“Houston was just digging out and beginning to turn around,” said Edward Friedman, an economist at Moody’s Analytics.

Many economists agree Houston will rebound because of its importance as a commerce center and as corporations with major stakes there pour in resources to rebuild. Other parts of the coast might take longer to recover, and some small business owners could even struggle to reopen.

Economists at BBVA Research worry, though, that Harvey may leave long-term scars on the Houston economy. They write that “devastating weather events may force people to move out and deter both future investment and migration, thereby reducing economic potential.”

But Greater Houston Partnership’s Jankowski is a believer in Houston’s resilience.

“If $26 oil doesn’t do us in,” he said, “52 inches of rain won’t either.”

Dallas News



56 Comments on "If $26 oil doesn’t do us in, 52 inches of rain won’t either"

  1. onlooker on Mon, 4th Sep 2017 4:51 pm 

    Stay safe Juan, the forecasts seem to mostly point towards Florida
    Oh and AP, right on the money. Just the extra rain that these turbulent systems are dumping makes them more threatening

  2. Dredd on Mon, 4th Sep 2017 5:13 pm 

    “If $26 oil doesn’t do us in, 52 inches of rain won’t either”

    Quoted from a Texas congressman vacationing in Europe as his home town of Houston is still suffering.

    https://theintercept.com/2017/09/02/harvey-texas-congress-prague-castle-john-carter-henry-cuellar/

  3. Apneaman on Mon, 4th Sep 2017 5:44 pm 

    Dredd, that kind of nonsense will work on most of his illiterate and semi literate constituents.

    “A False analogy is an informal fallacy. It applies to inductive arguments. It is an informal fallacy because the error is about what the argument is about, and not the argument itself. An analogy proposes that two concepts which are similar (A and B) have a common relationship to some property.”

    https://simple.wikipedia.org/wiki/False_analogy

    I’m predicting they will soon propose electronic voting by photograph as the dumbing down continues.

  4. Makati1 on Mon, 4th Sep 2017 6:22 pm 

    Ap, I doubt that voting will last much longer anyway. The serfs are slowly realizing that there is only one party and all politicians are liars. Either there will be a violent, bloody revolution or an open dictatorship. We shall see.

  5. GregT on Mon, 4th Sep 2017 7:27 pm 

    “Stay safe Juan, the forecasts seem to mostly point towards Florida”

    Seconded. Colorado sounds like a wonderful place to visit at this time of the year. Better to be safe than sorry Juan.

  6. GregT on Mon, 4th Sep 2017 7:33 pm 

    Also, some of the models still predict that Irma could cross the Everglades and gain strength in the overheated gulf waters, before making a secondary landfall on the gulf coast. Hopefully Irma hangs a hard right and heads back into the Atlantic. The last thing that the U.S. needs right now is another multi-billion dollar mess to clean up, and even more loss of life.

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