All Gulf offshore oil rigs and Louisiana land-based oil refineries are being shut down before Hurricane Gustav hits. Hurricane Katrina affected 19% of U.S. oil production. Also suspended is the 5.6 million barrels, or 56%, of imported oil that enter the Gulf every day. Hurricane Katrina caused oil prices to rise $3 a barrel. Hurricanes Katrina and Rita destroyed 113 offshore oil and gas platforms, damaged 457 oil and gas pipelines, and spilled nearly as much oil as the the Exxon Valdez. (Source: About.com U.S Politics, Gustav: Look For Gas Price Increase, August 31, 2008); CNN.com Gustav Sends Oil HigherAugust 31, 2008; About.com Environment, Hurricane Gustav: How Hurricanes Threaten Offshore Drilling and the Environment)
As important as these industries are, the huge concern is the damage Gustav could do to New Orleans. Hurricane Katrina wrecked $260 million in damage to the port, although it was open to ships just a week later. The city's tourism industry created $9.6 billion annually before Katrina, and has only recently returned to attracting 7.1 million visitors each year, up from 2.6 million in 2006.
All told, Hurricane Gustav could cost the economy $125 billion, with an additional $60 billion in insurance claims, if it is on the same scale as Hurricane Katrina. In 2005, GDP growth went from 3.8% in Q3 to 1.3% in Q4. However, in 2005 the economy was still growing strongly, and by Q1 2006 GDP growth bounced back to a robust 4.8%. This year, with the economy struggling to escape a slump, a 1% decline in Q4 could send GDP growth into negative territory. Combined with the negative growth rate in Q4 2007, this would qualify as a technical recession. (Source: AP, Gustav's possible economic hit is widespread, August 31, 2008; BEA, National Accounts; USA Today, Katrina damage estimate hits $125B)
