How Hurricane Ike Impacted the U.S. Economy

Question: How Hurricane Ike Impacted the U.S. Economy

Answer: When Hurricane Ike hit the Texas coastline September 13, 2008, it was on the high end of a Category 2 storm, the same as Hurricane Gustav. At its worst, it was a Category 4, but lost intensity as it landfall (as do most hurricanes). Nevertheless, the damage was much worse than Gustav. Ike was the third costliest hurricane to hit the U.S., after Hurricane Katrina and Hurricane Andrew. Total property damage to Texas, Louisiana, and Arkansas was at least $24.9 billion, based on insurance claims. Additional damage to Cuba, Bahamas and other Caribbean islands boosted the losses to $37.6 billion.

Cattle ranchers lost 4,000 animals right away. More than 11,000 workers became unemployed due to loss of businesses.(Source: Robbie Berg, National Hurricane Center, January 23, 2009; USA Today, "$6 Billion Storm?", September 19, 2008)

Ike Damaged the Seafood Industry

Ike first came ashore near Galveston Bay, producer of 15 million pounds of seafood annually. it dumped debris from the floor of the Gulf of Mexico on the shrimp and oyster trawlers that it didn't outright destroy. Those trawlers that can function won't find much to harvest. Ike killed Louisiana and Texas oyster reefs, where more than half the oysters sold in the eastern U.S. come. This set back the $100 million oyster industry in that area. Louisiana's $2.6 billion seafood industry sustained up to $300 million in losses to the double-knockout punch of Hurricanes Gustav and Ike.

Ike's Impact on the Oil Industry

Ike damaged pipelines in the Gulf of Mexico and destroyed 10 Gulf offshore oil rigs, which were shut down as were all 22 Texas-based land-based oil refineries. This part of Texas is home to a quarter of U.S. crude oil and refinery production.

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. Hurricane Katrina affected 19% of U.S. oil production, causing oil prices to rise $3 a barrel. However, oil prices barely budged in response to Hurricane Ike. That's because oil prices in general are in a decline this month, thanks to expectations of a slower global economy and the end of the U.S. summer driving season.

However, gas prices did rise to as much as $5 a gallon, since gasoline inventories were low in the area even before the hurricane hit. The Department of Energy delivered 300,000 barrels of oil from the Strategic Petroleum Reserve to the area. (Source: AP, "Ike skews gas; some stations ask $5 a gallon"; About.com Environment, Hurricane Gustav: How Hurricanes Threaten Offshore Drilling and the Environment

More than $1 trillion of insured commercial and residential property lay in Hurricane Ike's path. About $70 billion lay near the shore, with $900 billion further inland. Although hurricanes usually lose power the further inland they go, much of Ike's damage was because it had a very wide path.(Source: AP, "Nearly $1T of insured property in Ike's path", September 12, 2008)