A sobering day today, as we learned that New Orleans and much of the coast had not been spared after all. The waters swept away what many generations had built, and the task of trying to put it back together seems increasingly daunting.
Others are in a better position than I to communicate progress and needs of the relief effort. For those interested in what the economic implications of all this might prove to be, I offer these thoughts.
The storm’s damage to energy infrastructure appears to be significant, with 1.4 million barrels per day of crude oil production shut in, at least 7 drilling rigs adrift and 8 refineries shut down. The latter development was estimated to have idled 1.79 million barrels a day of refining capacity, or 10% of the nation’s total, according to Bloomberg or 2.3 mbd according to the Associated Press. And the damage to infrastructure is substantial enough that it’s hard even to begin the process of repair.
Bloomberg explains:
Port Fourchon, Louisiana, the base for three-quarters of
support services to the Gulf’s deepwater oil and gas facilities,
is shut because of the storm, said Port Director Ted Falgout…. “It’s going to be extremely difficult to supply and repair
platforms if the port is closed,” Falgout said. “The nearest
alternative location for logistics is Venice, Louisiana, which
was totally destroyed.”
There is also concern that if deliveries of crude oil through the Louisiana Offshore Oil Port do not resume soon, a number of Midwest refiners would also be forced to curtail operations.
I commented yesterday that the effects on refineries could be of much more economic significance than the loss of crude oil production. Because of the global nature of the market for crude oil, the cumulative reduction in oil use of the millions of barrels of lost Gulf production will be spread out across the globe and across time, reducing the size of the impact on crude oil prices. The same is not true of highly localized gasoline markets. Given the depleted stocks of gasoline inventories, there is little ability to cushion consumers from any further losses in U.S. gasoline production.
Today’s results on the New York Mercantile Exchange provided further confirmation of this. The price of the near-term futures contract for crude rose an additional $2.61 a barrel today, reflecting increased pessimism about the consequences for crude oil production, with the January through March contracts now over $70 a barrel. Gasoline, on the other hand, was up a whopping 41 cents a gallon, which comes on top of yesterday’s 13 cent a gallon hike.
The graph at the right shows the change in the futures price for crude oil or gasoline since last Friday as a function of the term of the contract, reported as a percent of where the price of that contract had been before the storm arrived. Since the futures price might be viewed as the price that traders believe will hold at the maturity date of the contract, the change in price records how the future looks different to the market today compared to perceptions before the storm hit land. Traders evidently believe that the price of crude will be 6% higher in October than it would have been without the damage done by the storm, whereas gasoline prices could be 19% higher. Of the short-run problems that Katrina raises for the U.S. energy market, the refining issue appears to be the significantly greater short-run challenge.
One of the questions I am almost always asked by reporters is, “will the price Americans pay at the pump go even higher?” My stock answer is, “I’m not sure.” But in the present circumstances, having just seen a 55 cent per gallon rise in the price of September gasoline futures, the question is a no-brainer– American consumers are in for a huge shock at the pump within a very short period.
And the next question I get asked is, “will that put the U.S. into a recession?” If it were just the consequences of the storm itself, my answer would have been, “probably not.” The reason is that I think most people would see this as a special event, tragic but thankfully short-lived. But this event did not arrive out of the blue. Instead, it came in an environment in which there was already considerable anxiety about gas prices and sound basis for worrying about a possible recession even if Katrina had done no harm.
Could this be enough to tip the whole economic cart over? I’m not certain that it will. But it would seem foolish to deny the very real possibility that it could.
You have only scratched the surface.
There are plenty of other economic issues and impacts worthy of exploration.
we are losing 1.4 mbd of crude production.
what about the loss of LOOP which handles 13-18% of USA’s oil imports? doesn’t that add 1.4mbd already lost up to say 3-4mbd?
Hurricane Katrina – Major Highway Closures
Louisiana
All roads into the New Orleans area are closed
* See link below for other listings. Not much better to the east of New Orleans.
Mississippi
This information was last updated at 5:00 p.m. on Tuesday, August 30th.
Closed:
I-10 from Louisiana to Alabama
Hwy 90 from Louisiana to Alabama
Hwy 49 from Jackson to Gulfport
I-59 from Louisiana to Alabama
Hwy 63 from Hwy 98 in Lucedale to Moss Point
Hwy 607 from I-10 to Stennis Space Center
Hwy 84 from Collins to Waynesboro
Hwy 98 from Mobile to Hattiesburg
Alabama
US 98 – Mobile Cochrane Bridge – closed
I-10 Mobile Wallace Tunnels – limited traffic
Highways entering Mississippi closed as listed above
Florida
None identified
—-
Louisiana Emergency Road Closures
http://www.ohsep.louisiana.gov/evacinfo/rdclosureindex.htm
Mississippi Emergency Road Closures
http://www.gomdot.com/
Alabama Emergency Road Closures
http://www.dot.state.al.us/closures/
Florida Emergency Road Closures
http://www.floridadisaster.org/
FEMA
http://www.fema.gov/
—-
Consider Natural Gas, which cannot be supplied from outside North America in more than minimal quantities via a few LNG terminals.
Unlike gasoline and fuel oil which can be imported.
This will hit heating bills like a sledgehammer on a watermelon.
Possibly more impact than gasoline by 2006.
Wouldn’t you imagine that this development might finally cause the Fed to rethink their policy of continual interest rate increases? Macroblog publishes a Fed prediction every Monday, based on interest rate futures. I don’t know the details of his methodology, but it does look like there has been a tiny movement in the fed funds interest rate futures market, hinting at lower rates in the end of year time frame. See the little “step up” for example in http://www.cbot.com/cbot/pub/page1/1,,1563+chart+2268,00.html?symb=ZQ&month=Z&year=05&period=&study=&study0=&study1=&study2=&study3=&bartype=&bardensity=
Further assessment of Katrina’s economic impact
As companies involved in the U.S. oil and gas industry continue to assess the damage that Hurricane Katrina has caused to Gulf of Mexico and Gulf Coast production facilities, Royal Dutch Shell PLC announced on Tuesday that its Mars floating…
Dr. Hamilton – can you make a point to post on the recessionary impact of Katrina, as well? WIth the Fed pursuing its traditional hawkish goals, what can and should we expect concerning possible recessionary output gaps to form? What role, if any, should the Fed pursue?
Prof. Would a good short term policy workaround to the refinery problem be a 90 or 120 day lifting of the regional gasoline blends in order to allow for a marginal increase in our ability to import refined gasoline into non-Southern markets?
::::
And the next question I get asked is, “will that put the U.S. into a recession?” If it were just the consequences of the storm itself, my answer would have been, “probably not.” The reason is that I think most people would see this as a special event, tragic but thankfully short-lived.
::::
I am not as optimistic. If the consumer had a sufficient ‘buffer’ going into this mess – a pool of liquid net worth outside of home equity & 401Ks – then I would agree with the above analysis… but they really don’t.
My depression era father would say… ‘this is why you people (use youngsters) need to save… save money, not ‘phantom equity’… it isn’t for when you are old and about to die… its so you can GET old and about to die!’
Unfortunately those are the hard lessons people have to learn for themselves… and we may have to learn them all over again, a family at a time.
There are going to be an awful lot of families for which the straw just keeps getting piled on the back of the camel… first interest rates… now gas prices… next winter it will be natural gas… then probably insurance premiums (across the board to make up for the localized losses).
I don’t think families are going to look at all this – spread out over months, heading into the holiday season – and say ‘Oh no big deal, it is only a special event and short lived…’ I think they will see the money pouring out like the water poured into NOLA & be forced to make cuts… big cuts too.
We also might see the teeth of this new bankruptcy bill sooner than we all thought & in full force in Louisiana, Mississippi & Alabama soon.
Lots of forces vectoring to a serious change and not for the best… not at all.
“There are going to be an awful lot of families for which the straw just keeps getting piled on the back of the camel… ”
Yeah. We saw the news yesterday that poverty has increased and employer paid health insurance has decreased. I saw that even economisty from the American Enterprise Institute said the profits from this recovery are going to capital and not to workers. If even a Rethuglican economisty said it, must be true, right?
Seriously, you folks who preached outsourcing share a responsibility for our paltry incomes and lost jobs. Great patriots, you are!
Camille, no offense, but you have no idea what you’re talking about.
Fester, I plan to write about this issue in today’s post.
Scott writes: “Camille, no offense, but you have no idea what you’re talking about.”
Scott: Though Camille is obviously angry, the economists and ideologues who sell free trade as the solution to all problems can also be said to not know what they are talking about. And there are respected economists who have questions as well. Does Joseph Stiglitz, a nobel winner, not know what he is talking about? Are you his superior? And please note, I’m not playing the experts against experts game. But there are legitimate complains about the way in which free markets have been implemented.
Consider it this way: the relationship between trading communities and blocks, with their barriers and regulations, are a sort of ecosystem that has developed over a long time period. Then some economists–or I should say a particular ideological branch of economists in a rather eclectic profression–take the lead and define how things should be. They describe how it will be optimal, neglecting to point out that they really can’t prove that it is optimal, while also neglecting to point out that they often have to warp and twist the words of their founders such as Riccardo and Smith in order to convince the public that what they are doing is right.
This is not an argument against liberalization and trade. But it’s not clear that the program has been well thought out. Right now we have enormous instabilities with China. I agree that the market will resolve these instabilities. But many markets are prone to mania and periods of instability that might better be controlled through some form of regulation.
I tend to think in terms of simple models at times. The US has a standard of living that has been way ahead of that of the rest of the world. Let’s say since WWII. Consider that a dam with water behind it. One goal of the US has been to increase the standard of living elsewhere in the world. Although the goal is to raise all boats, as we are commonly told, I do believe that there is only so much water. I think energy depletion is the limit. We will start seeing its effects within our lifetimes and our children (I’m 45) will be greatly affected by it.
So we’ve got this dam. With lots of water. That’s the US. And we’re poking some enormous holes in it. Water is flowing to other parts of he world. Raising their standards of living. But I think it will be necessary for the standard of living of those in the US to decrease. It’s inevitable. We’re already seeing the signs since the 70s. You can’t argue otherwise. Now the only question is, how do we manage this. Do we just completely step back? Do we completely deregulate everything? If so, then we should deregulate the borders as well. Let the people flow where the jobs are.
If you’re not open to that, then you’ve already regulated. And once you’ve regulated that, you need to regulate other things as well.
My point on this long and somewhat meandering response: I’m not convinced that trade liberalization is taking into account the often catastrophic way in which capital and commodities and products and manufacturing and jobs can slosh around the globe, often creating as much hardship as good. Particularly hardship for the extremely poor while the benefits appear to be realized by the fortunate few. I think there might be better ways to do this globalization thing that will make it more sustainable. Otherwise, we will see trade barriers shoot up randomly for purely political reasons, and then we all lose.
In summary, I think there are valid economic arguments against the way in which globalization is taking place.
I know the focus is on the US but I’d be curious as to how this will affect New Orleans and the gulf coast in the long run. I don’t get the impression that these are areas that have faired well economically over the last few decades. And the rebuilding for this will suck up the resources all that much more.
For example, take a look at the New Orleans MSA (the metro, not just the city). From 1970 to 2000, it’s population increased just 17%. That compares to the 13% (IIRC) growth the USA as whole saw in just 10 years. From 1980 to 1990, it shrank by 1%. And from 1990 to 2000, it grew by only 4% (again, very small compared to the US as a whole). To me, the place has been treading water in terms of it’s economic livelihood. I can’t imagine this is going to do anything but set it back that much more.
A few thoughts on Katrina from the Upper Midwest – the closure of the port of NOLA effects far more than just oil – for example, 60% of corn exports go thru there and this closure is slamming the basis levels for the river elevators – which loops back to the cash prices paid to farmers. In addition, LDP payments are going to be huge this year due to these wide basis levels.
Rail – also messed up greatly – the loss of the river will put a great deal of freight on rail and disrupt existing patterns. Huge ripple effects here.
Truck – I 10 is closed – no idea how much freight goes thru here, but it has to be a tremendous amount. Rerouted freight will cost more and be delayed as again, shippers scramble to find ways to get products that are being displaced from their normal avenues.
IOW, just looking at freight alone, Katrina’s wipeout of port NOLA is going to have a huge and long-term impact that’ll ripple all across the economy.
As far as the question of the Fed behavior, Macroblog has re-run his model and it does show a small increase in the market’s perception of the probability that the Fed will slow its rate of increase. http://macroblog.typepad.com/macroblog/2005/08/funds_rate_prob.html
Should have highlighted river barges for the first part of my above post – barges which carry grain south are the same barges that come north fully loaded with salt and coal and fertilizer and cement and many other products. These loads need to find a new way to be transported – and this is going to get done at a much higher price.
I think we’re in for many months–if not years–of shortages of certian products. At the very least they’ll have to be re-routed through other ports, at greater cost.
I finnally opened the Oil Drum today (what is happening? too much people trying access the site?)
The oil production situation is worse than everyone think.
http://www.theoildrum.com/story/2005/8/31/83553/8973#more
Joo Carlos
Bush administration to open SPR
The Bush administration says it will draw on the Strategic Petroleum Reserve as the devastation from Hurricane Katrina continues to drive up oil prices. Energy Department officials raised the possibility of tapping the SPR yesterday. As Bloomberg repor…
::::::::
A few thoughts on Katrina from the Upper Midwest – the closure of the port of NOLA effects far more than just oil – for example, 60% of corn exports go thru there and this closure is slamming the basis levels for the river elevators – which loops back to the cash prices paid to farmers. In addition, LDP payments are going to be huge this year due to these wide basis levels.
:::::::::
Jon – if I am not mistaken the carry over (crops from last year’s harvest) is near record lows for corn & beans… plus the harvest season is just getting underway. I don’t think the ‘loop back’ effect to the elevators & farms will be as severe as it might have been a few years ago when they were piling the corn on the ground and every rail car & barge was full headed to the Gulf ports… there is bin capacity for a while… probably long enough to get the grain handling portion of the port back up and running.
Just a WAG
‘But many markets are prone to mania and periods of instability that might better be controlled through some form of regulation.’
Oh yeah, regulation is NEVER subject to mania.
Dryfly,
Actually the carryout for corn is quite high – projected 1.9 billion and that’s assuming no further cuts in exports or feed usage. Sure, it’s less than last year’s 2.5 bbu, but still quite high. Furthermore, this year’s corn crop projected at 10.35 bbu is going to be one of the largest on record – compared to last year’s 11.8 it sucks, but it still is going to be quite large.
Similar for beans – and since bean carryout is predicated on an active export market, the close of NOLA port is going to increase the carryout a bit.
The loopback is being felt right now and is being exacerbated by the huge amounts of cash grain flooding the market as it comes off loan. Dubuque is bidding -51 Cz right now for cash and – mid 30s for Oct/Nov delivery – and that’s likely to fall from here as barges get repriced.
There will be plenty of piles this year – everywhere but in Illinois.
And to make things even nastier – the barges need product as they come back north. This is going to get worse before it gets better.
DryFly redux
Just got an updated bidsheet from the Dubuque river terminals – corn for Sept is bid -.685 under CZ – Oct at -.47 and Nov at -.36
That translates into $1.48 spot corn at the terminal.
That’s roughly 75% of production costs.
Major ripple effects.
I don’t think I need to explain that this very low basis level is due strictly to oversupply of old crop and undersupply of freight?
Let’s estimate the effects of Katrina on the nation’s electric bill. (Most data from EIA and all calc are BOE (back of envelope).)
First, 18% of the MW-hr nationwide are fueled by natural gas (NG). Most of this is for peaker and some intermediate load plants so one could estimate that a third of the total price of electricity is due to NG-fuel generation (a really rough number). Maybe 60% of the cost of the NG electricity is fuel (better, but still SWAG). Multiplying .33 X .6 = 24% of total electric price is due to the cost of NG.
In April 2004, the average NG price to generators was $5.59/mmBTU. Today, the spot price is over twice that and pushing $12/mmBTU. Of course, many places have lower prices due to local market conditions and many generators have long-term or hedged NG supplies. Plus April has the cheapest gas on the seasonal cycle.)
So if 24% of our electric bill is gas and gas doubles….48% increase in generation costs over April 2004? That sounds high and generation is only half the cost of retail power. Some of the load will shift to coal; nukes already run flat-out, all the time but coal prices are up over 16% April-to-April 2005.
I’d guess that, barring a NG price collapse, electric bills will increase 25% over April 2004.
Please, somebody show me I’m wrong.
Can anyone explain why the stock market is taking all of this as a buy signal? Up today and up for the week.
Stiglitz thinks free trade hurts a nation? I am not familiar with him taking this position, but if that is the position he is taking then yes, I think he’s wrong. Stiglitz’s contribution to economics is not in the area of international trade but rather in the economics of information, and while I am familiar with his work in that area, I am not familiar with it in the context of what we’re talking about. There is some kind of market failure due to asymetric information, I’m guessing, and this will lead trade outcomes to leave one or both parties worse or better off?
Krugman, no conservative of free market ideologue, won the John Bates Clark award for his work in revitalizaing trade theory, and if I’m not mistaken, his undergraduate textbook goes to great lengths to defend free trade as advantageous to both parties. I think the consensus among trade economists is that Ricardo’s theory of comparative advantage is still valid, though I am now interested in learning more about why Stiglitz disagrees.
::::::::::
Actually the carryout for corn is quite high – projected 1.9 billion and that’s assuming no further cuts in exports or feed usage.
::::::::::
Ya that’s more than I thought… I didn’t think there was that much out there… and have not seen a lot of truck traffic hauling out the old crop to make way for the harvest. I live in S Minnesota & travel MN, WI, IA, NE, MO, IL… so would see it I think… have in the past anyway.
I suppose if farmers waited this long to empty their bins they are really screwed now.
Well I guess we do add that as another thing to watch.
steve,
my guess on the stock market is that folks are speculating that the Fed will ease up on interest
rates. the movement might well reverse itself as
more info comes in.
Stiglitz isn’t against free trade. He’s against the way it has been implemented. Paul Roberts has also been arguing about the issue of free trade for a while (Roberts being a fairly libertarian conservative fellow who finally couldn’t put up with the idiocy of the bush administration any longer). E.g.
http://www.counterpunch.org/roberts05192005.html
Some of the criticism that has been raised by stiglitz is summarized below:
http://www.thirdworldtraveler.com/Globalization/Stiglitz_Globalizaton.html
Another comment made on a blog: “The implementation of overly simplified theories and ideologies are meeting growing criticisms. For example, see Globalization and its Discontents by Joseph Stiglitz (Penguin Books, 2002). Stiglitz, former chief economist of the World Bank, heavily criticizes the IMF for pursuing an ideology of neoliberal market fundamentalism which is overly simplistic, without paying attention to real human needs while also being influenced by, and meeting the needs of, the finance community. At the same time, Stiglitz makes a great case for market economics, but without the ideology, recognizing the complexities, and the roles society and democracy must play.”
My point in this and other posts is just that people throw around ideas like free trade, Adam Smith, invisible hands, and other similar matters but those are primarily talking points. The devil is in the details, and the details are not well understood both at a practical and a theoretical basis.
Dry
I’m in SC Wisco – traffic is down b/c demand is down. Lot of folks are just going to keep their bins full and take the NC straight to the elevator. I’m already piling corn – expecting to pile about 2-3mbu and carry for a while. Bullspread z/h at 1.5m at 6 and wishing I had done more. Worst part, is that the basis trainwreck is really just starting.
Gonna get weird when we start seeing some real yield numbers. Ought to be pretty decent where I’m at – but northern Ill is looking 125 bpa – yikes.
::::
There is some kind of market failure due to asymetric information, I’m guessing, and this will lead trade outcomes to leave one or both parties worse or better off?
::::
I think that it is with this brand of model-building and inquiry that non-economists (though they may not realize it) are frustrated with economists: using the representative agent. I am familiar with its attractiveness from a tractability POV, and how innovations have relaxed it. But still, many an economist’s advice on trade comes down to saying that it makes an economy’s representative agent better off under plausible assumptions.
But people like Camile look out and see the Illinois “broom maker” (say) losing a job and don’t immediately see the consumption gain that the outsourced “broom maker”‘s lower wages represent to the representative American (of which she is presumably part).
I think this is what Stiglitz says much more eloquently in Discontents — T.R.E., I think you are right when you say, “the devil is in the details, and the details are not well understood both at a practical and a theoretical basis.”
But I’d like to see JDH’s weigh-in on this — he’s been working with representative agent models at least as long as any of us have.
Lost the name and email in the last post.
“So we’ve got this dam. With lots of water. That’s the US. And we’re poking some enormous holes in it. Water is flowing to other parts of he world. Raising their standards of living. But I think it will be necessary for the standard of living of those in the US to decrease.”
So this is the bottom line, behind the scenes, rationale for globalization.
You think you can sell that in a democracy?
T.R. Elliot:
>people throw around … talking points. [but] details are not well understood both at a practical and a theoretical basis.
Well said!
The mathematical models of free trade I’ve seen don’t appear to go much deeper that Ricardo did in his original book. More mathematical notation, to be sure, but no greater depth.
Those who claim that Ricardo’s comparative advantage validates free trade are using obsolete concepts to justify their beliefs. In Ricardo’s time, comparative advantage referred to the free flow of goods and services across borders. Today, capital flows freely across borders whereas in Ricardo’s time it did not. Ricardo assumed capital would necessarily be re-invested at home and benefit the home economy including labor. Now, capital investment follows comparative advantage across international borders to markets where costs (usually labor) are lowest. If you are a capitalist — i.e., someone with alot of capital to invest — free trade benefits you because you can seek the highest return by investing abroad. If you are a working stiff, it does not b/c your employer will sell your job to the lowest bidder at the earliest opportunity. Those who pretend that free trade improves U.S. living standards are either capitalists, which is understandable, or just free market ideologues who blindly cut their own throats. This is not intended to sound like some sort of Marxist diatribe. The point is that free trade lowers living standards in the wealthier trading partner.
Through trucking generally uses I-12 to get around New Orleans anyways. Any idea how it fared?
Camille: Don’t get me wrong. There are gains to be had for all from trade liberalization. Over the past 60 years, since the end of WWII, the tide has risen, and a lot of boats have been raised. In addition, all of Western Europe could very well live under communist dictatorship if not for the economic efforts made by the US. We’ve all gained from that. We’ve gained from China joining the world community (to whatever the degree they have),India, South America, etc. The integration between America and the rest of the world (e.g. cultural, university, corporate) is amazing and has been productive for many if not most (though I think the last x years of the Bush administration is erasing some of these gains in good will).
Where I get tweaked is when ideologues (Stephen Moore is a good example) dance around singing the song of free trade when it’s clear they’ve just picked up some handy talking points and are selling what makes them feel good. People pick up on that and, next thing you know, we’re watching talking heads spouting diatribes against, for example, socialist Europe. There is not one way. That’s what I get annoyed at. Those who sell their one free-market fits all. They’re religious fanatics if you ask me. And I think that’s what got Stiglitz tweaked as well. He looked at the ideological control of the IMF and other international organizations (largely American control) as trying to shove a one-size-fits-all approach onto the rest of the world.
Now on the point about the standard of living decreasing in the US. It’s not happened much yet. But my gut tells me that the world is heading into a new regime. It started in the 70s, we were able to pull back a bit in the 80s and 90s–through globalization, debt, cheap energy, productivity gains,etc–but the problems initially discussed in the 70s are back and, this time, I don’t think they’re going away.
What this means to me is that the US standard of living will decrease. I don’t see any way around it. If we put up trade barriers willy nilly, the standard of living will go back to that of–what, the 30s? That’s not good. That’s a disaster. But that doesn’t mean we drop all barriers. Or drop national initiatives (I still think of the computer chip, digital communications, etc. as spin-offs of US military R&D).
The US consumer has, to a large degree, been able to improve his/her standard of living through globalization. But I think that increase is now coming to an end and I think the numbers show it–the upper classes still making great gains and the rest just getting by or even falling behind. I don’t see this ending and in fact see it getting worse.
The problem with globalization, as I see it, is that we’ve taken an approach that serves the American consumer short-term and, probably, serves the holders of capital–and patents–long-term. I would prefer to have seen an approach to globalization that looked for greater self-sufficiency rather than just trade. Dropping trade barriers in a willy-nilly fashion certainly serves the interests of capital holders, globalized corporations, as well as many of us who purchase the high quality cheap products, but I’m also concerned that it hasalso created unsustainable imbalances, both trade imbalances and even population imbalances that will cause great hardship–perhaps unnecessary hardship–when they are resolved.
In summary, I’m not anti-trade. I just think we should be cautious and not always believe those telling us that dropping all barriers will lead to some greater good. We’re supposedly all rational and out to maximize our “utils.” I’ve never seen a util. Can’t put a util in my car. And don’t seem to have any utils in my bank account. Therefore, I’m just not sure if a theory that maximizes utils should be applied 100% to a world that doesn’t seem to have them.
Katrina and the probability of recession
Kash returns from his hiatus and tries to discern the “animal spirits.” He’s worried. Even temporary problems can get magnified if they contribute to a broader change in psychology. And I think that the current situation contains the seeds for…
OK, I see a problem in my calc of electric price impacts.
While the fuel bill for generation might increase 24%, generation is only HALF of the total retail price.
THEREFORE – total retail electric bills could increase 10 to 15% over April last year.
Also – the number of generators fueled by NG increased 18%, from 809 to 958 April to April, 04 to 05, making us even more sensitive to NG price increases.
Further, September, not April, is the typical seasonal low for NG.
How badly is the Gulf oil infrastructure damaged?
And how much of a hit will the US economy take as a result of that damage? Watching CNN last night and reading various press accounts of the hurricane aftermath, we’ve noticed that little of the coverage has dealt with…
Will the Fed pause this month?
The aftermath of Hurricane Katrina has seen some US econobloggers fear the worst. James Hamilton warns that, coupled with higher energy prices, it could put the US into recession. (For other blogger views see William Polley’s useful round-up on Katrin…