The Economy

Katrina's Impact

Sept. 6, 2005

A week after the hurricane, there's no bottom line. But oil refining, chemicals, glass, coal and steel will likely figure in the calculation.

John McClenahen

Like the loss of human life, the toll on the U.S. economy and on manufacturing is still being counted more than a week after Hurricane Katrina roared across the waters of the Gulf of Mexico and into the Gulf Coast of the United States.

Some early economic assessments are decidedly optimistic. "While the full impact of Hurricane Katrina will take some time to sort out, we believe the U.S. economy has the foundation to weather the storm," judges Martin Regalia, chief economist of the U.S. Chamber of Commerce, Washington, D.C. "While the near-term negative regional economic impact in the wake of Hurricane Katrina could be quite noticeable in upcoming monthly national economic data, substitution to alternative vendors and rebuilding some of the damaged structures should increasingly counter the initial negative national economic effects," says UBS Securities LLC, New York. Indeed, for now UBS is not reducing its inflation-adjusted GDP projection for 2006 from about 3%.

How Companies Are Helping

Chevron -- Donated $3 million to Red Cross. Will donate $2 million to charities and relief efforts near Chevron businesses in affected states.

Honda -- American Honda pledged $5 million to the Red Cross. Also making available portable generators, water pumps and vehicles to agencies working in affected areas.

Anheuser-Busch -- Is supplying 2.5 million cans of drinking water per week to victims. Also has donated $1 million to the Red Cross. Additionally it will match $1 million in funds from its independent distributors.

See what other companies are contributing

Clearly more cautious, however, is Thomas J. Duesterberg, president and CEO of the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group. "We don't know the extent of the long-term damage to energy production and refining. And we don't know the extent of the damage to the transportation system. [And] both of those are pretty important economy-wide," emphasizes Duesterberg. He figures "at least 5% of [oil] refining capacity is offline for at least a month -- and maybe more." Meanwhile, a spike in natural gas prices is doing a cost number on the production of fertilizer and plastics, which use natural gas for feedstock, and on the production of glass, which uses gas as a heat source, notes Duesterberg.

At the same time, the hurricane at least temporarily disrupted transport on the Mississippi River and in and out of the Gulf -- and barges that carry bulk commodities are missing. "All of this is potentially a problem for manufacturing. Coal is one thing. [And] moving bulk commodities like steel or raw materials could be impacted," adds Duesterberg.

But even as damages are still be assessed, some production capacity is returning is returning along the Gulf Coast. For example, DuPont & Co.'s Burnside, La., and Mobile, Ala., plants, two of five company sites affected by the hurricane, are now back in operation. ExxonMobil Corp. expected to be moving the maximum amount of crude oil through its Baton Rouge, La., refinery by day's end on September 4 -- and to have the refinery's gasoline production rates at maximum as well.

Changes In Events
See what New Orleans scheduled conferences have been altered.

Although the amount of rebuilding -- of homes, commercial buildings and factories--that will take place in the Gulf region, particularly in Louisiana and Mississippi, is yet to be determined, the spending could be significant. "It seems plausible to us that such extra construction could total as much as 0.4% to 0.5% of the around-$13 trillion U.S. nominal GDP -- a key potential counter to possibly higher than expected energy costs in 2006," figures UBS.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.