Economic Impact of Hurricane Isaac
Monday, August 27, 2012 3:01 PM
Hurricane Isaac could rival Katrina in economic impact, according to Forbes.com'smost popular article today. However, Bloomberg reported later this morning that oil prices dropped on speculation that Isaac will be reduced to a Category 1 hurricane by the time it is predicted to reach land on Aug. 29.
Depending on the power of the storm as it tracks across the Gulf of Mexico and makes landfall near the Louisiana-Mississippi Gulf Coast area, it could threaten energy markets, inflate gasoline prices or cost certain insurance companies millions in property damage claims, according to Forbes, which compared it to Katrina.
Hurricane Katrina has been labeled the most expensive hurricane in U.S. history, with an economic impact of more than $100 billion.
Here are Forbes.com's key predictions for Isaac in light of Katrina's impact:
- Energy prices: Oil and gas markets will react bullishly to Isaac, if it looks like it could damage or shut down the heart of the Gulf offshore oil and natural gas production. Katrina negatively affected 20 percent of U.S. oil production, and oil, gasoline and natural gas futures prices soared on the NYMEX exchange.
- A Category 5 Isaac could test improvements in offshore oil and gas rig infrastructures put into place after Katrina. The rigs have not been tested by a storm of that magnitude.
- The Gulf now accounts for about 23 percent of U.S. oil production. If production is interrupted significantly by the hurricane, gas prices at the pump are likely to rise as they did after Katrina, when they rocketed to $5 a gallon in some areas of the country.
- If Isaac hits lands with peak winds of 105 mph, insurance companies that have the largest market share of residential and commercial properties along the Gulf Coast -- State Farm, Allstate and Farmers Insurance group -- stand to suffer heavy losses.