2005 Atlantic Hurricane Season - Economic Impact

Economic Impact

The level of activity of the season had far-reaching economic consequences. Because of the vulnerability of both oil extracting and refining capacity in the Gulf of Mexico, storms led to speculative spikes in the price of crude oil. The damage to refinery capacity in the United States caused gasoline to soar to record prices (even adjusted for inflation). Governments in Europe and the United States tapped strategic reserves of gasoline and petroleum, and shortages were reported in the days after Katrina in areas heavily dependent on the Gulf of Mexico for refined gasoline. Even weeks after the storm, prices remained elevated as the shortage in production remained over 1 million barrels (160,000 m3) per day.

Rita damaged wells in the western Gulf of Mexico which were primarily exploratory, leading to concerns that future production would be damped for some time to come. Additionally, as the storm churned in the Gulf, forecasters predicted that it would strike Houston, Texas, the location of many major oil refineries that survived Katrina, leading to additional spikes in oil prices before the predictions changed. In Georgia, Governor Sonny Perdue declared "snow days" on September 26 and September 27, 2005, at all Georgia public schools to conserve fuel for school buses in anticipation of Rita's impact. However, as the storm veered away from Houston shortly before landfall, damage to refining capacity was not as great as feared.

Agriculture in multiple countries was hard hit by extremely heavy rains from severe storms during the season. Early in the season, Hurricane Dennis caused significant damage to various citrus and vegetable crops in Cuba, though the damage was not crippling. In Central America, Hurricane Stan and associated nontropical storms dropped upwards of 20 inches (500 mm) of rain, causing, in addition to severe flash floods and mud slides, heavy damage to crops, especially to the banana and coffee crops, which were nearly ready to be harvested. This caused significant economic disruption in Guatemala and surrounding nations, as the rural economies are highly dependent on the coffee and banana crops. When Hurricane Beta struck Nicaragua later in the season, it also caused heavy damage to the banana crop, but the harvests had already ended, mitigating economic disruption.

Katrina also had significant political consequences, as President George W. Bush, Louisiana governor Kathleen Blanco, and New Orleans mayor Ray Nagin all came under heavy criticism for what were considered sluggish or inappropriate responses to Hurricane Katrina. On December 14, 2005, congressional hearings began to investigate whether these claims had any merit. In addition, Michael Brown, head of the United States Federal Emergency Management Agency (FEMA), was forced to resign from his post after the organization came under fire for what was perceived as an insufficient response to Katrina.