Wilma devastates Cancun and Cozumel

Cancun and Cozumel.gifHurricane Wilma came ashore yesterday afternoon directly on the popular Mexican resort communities of Cozumel and Cancun as a devastating category 4 storm. Although damage reports are still skimpy because of poor communications to the area, there is high probability that both of these communities and the surrounding area will suffer catastrophic damage that in some cases will take years to rebuild. Suffice it to say that this area will not likely be in a position to accomodate tourists for an extended period of time. Jeff Masters puts the situation in perspective:

Wilma’s landfall will bring enormous devastation to the 40 to 70 mile wide section of coast exposed to the intense winds of the hurricane’s eyewall. A long period of calm lasting up to seven hours will accompany the passage of the slow-moving eye. During the next two days, Wilma will move very slowly over or just offshore the Yucatan. This will expose structures in the hurricane zone to very long duration hurricane force winds, likely making Wilma Mexico’s most expensive hurricane disaster ever. Wilma’s rains will add to the misery, reaching 20 inches or more over not just the Yucatan, but the western tip of Cuba as well.

Although the current track of the storm into Florida on Monday is still unclear, the current predictions are that it will not be a major hurricane (cat 3 or above) by the time that it makes landfall in Florida. That’s good news for Florida and the U.S., but not much consolation for our friends in Mexico.

Wilma!

Wilma.jpgThis is getting very monotonous.
Hurricane Wilma moved toward Mexico’s popular Cancun resort Wednesday as an extremely dangerous category 4 storm that has already become the most intense hurricane to form in the Americas since such storms began being recorded over a century ago. The National Hurricane Center in Miami warned that Wilma would be a significant threat to Florida by the weekend and could hit the western coast of Florida as at least a category 3 storm. About the only good thing about the storm’s projected path is that it is far enough south at this point that it would probably not cause much additional damage to the Katrina and Rita-ravaged Gulf of Mexico oil and gas production facilities.

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Addressing the real problem in New Orleans

New Orleans map.gifEdmund Phelps is the McVickar Professor of Political Economy at Columbia University. In this Wall Street Journal ($) op-ed, Professor Phelps makes the remarkably simple but adroit insight that much of the political debate over the rebuilding of New Orleans from the damage of Hurricane Katrina is missing the true problem that bedeviled New Orleans:

The nation is still reflecting on the sight of New Orleans unprotected from Katrina and too feeble from poverty to run from it. Yet some basic issues have scarcely been debated.
So far, the focus has been on what to do about lost and damaged infrastructure. For our legislators and the public, that has raised fascinating questions of political philosophy. The federal government does not pay to defend New York state against Lyme disease or New York City against terrorist attack. So it is a question why it is a federal duty to pay for measures to protect or repair New Orleans from local storms.
The economist’s answer is that a disrupted New Orleans has external costs on the farmers upriver and the producers everywhere who depend heavily on the city’s great port to ship grain. At likely levels, New York’s Lyme disease does not threaten the rest of the nation. Protecting Wall Street ranks high on that external cost test, but not high enough in the estimation of Congress. It is a matter of degree.

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Assessing the hurricane damage to Gulf production facilities

Typhoon4.jpgFollowing on this post from yesterday, the markets continued to react to more information that indicates that damage to Gulf of Mexico offshore production and drilling facilities from the recent hurricanes is going to reduce production and exploration from that key region for an extended period of time.
That information, combined with the slow process of restarting Gulf Coast refineries, is generating one of the more unusual political ironies that America has seen in some time. As a result of the restricted energy supplies from the Gulf region, the outspokenly pro-exploration and production Bush Administration is sounding eerily like the Carter Administration from the late 1970’s, promising a national energy-conservation campaign to give Americans tips on saving energy during the winter heating season.

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An interesting perspective

Mineyard.jpgIt is becoming clearer each day now that at least a substantial amount of the initial information coming out of New Orleans in the aftermath of Hurricane Katrina was either exaggerated or misinformation. One such piece of misinformation was that large numbers of murders were occurring as a result of gunshots.
Commenting yesterday on the fact that only seven gunshot victims had been identified in the autopsies done on the first 650 or so bodies recovered from New Orleans, Coroner Frank Minyard made the following observation:

“Seven gunshots isn’t even a good Saturday night in New Orleans.”

Market responds to Rita-related damage to Gulf production facilities

chevron rig.jpgFollowing on this post from yesterday, Chevron Corp.’s announcement that its Typhoon tension leg platform was severed from its moorings by Hurricane Rita and is floating upside down in the Gulf of Mexico dovetailed with the news that natural-gas futures on the New York Mercantile Exchange skyrocketed 10% to almost $14 per million British thermal units, which is its highest closing on record.
Typhoon2.jpgThus, if it’s going to be a long, cold winter in the U.S. hinterlands this winter, then it’s looking increasingly as if it’s going to be a long, cold, expensive winter.
Natural-gas futures on the Nymex for delivery in October rose $1.251 to $13.907 per million BTUs. The expiration of the October contract at the same time that the delivery point for Nymex futures, Louisiana’s Henry Hub, which has been closed down for the past week, added to the uncertainty and volatility in the market.

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Paul Burka on the Houston evacuation plan

evacuation5.jpgFollowing on previous posts here and here regarding Houston’s hurricane evacuation plan, Texas Monthly editor and former Houstonian Paul Burka weighs in on the plan in this OpinionJournal op-ed. Mr. Burka does not offer anything new here in terms of a solution, but he does do a good job of framing the key issue:

There is no way that government can assure that the people on the roads are the ones who are in the most danger, those from Galveston and the low-lying areas near Galveston Bay. Common sense needs to be restored to the evacuation process, so that people with the greatest risk of danger will make the decision to leave, and those with the least risk will stay off the roads.

Tory Gattis over at Houston Strategies also has some good thoughts on how to improve the plan.

Guaranteeing expensive natural disasters

flood insurance.gifIn his Wall Street Journal ($) Business World column today, Holman Jenkins picks up on a theme of several previous posts (here, here, here and here) that point out that governmental policies that distort risk analysis virtually guarantees that natural disasters in hurricane-prone areas will be increasingly costly:

Louisiana’s Sen. Mary Landrieu offered a perfect expression on CNN on Sunday of where the new blank-check compassion is leading us: “Wolf, poor families were crushed. Middle-income families are staggering. And wealthy families have been just punched in the stomach. It is going to take a huge national effort for us to realize the importance of this Gulf Coast region.”
To wit, everyone must be restored to their previous status and possessions, or better, at taxpayer expense.

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Rita hammers offshore production facilities

rig offshore3.jpgThis Financial Times article reports that preliminary assessments of the damage that Hurricane Rita caused to offshore oil and gas drilling and production facilities reflect that the damage is greater any other storm in history.
Rita’s path — which was west of the path of Hurricane Katrina last month — tore through an area of the Gulf of Mexico that contained a large amount of exploratory rig activity. Given the apparent damage to the rigs, the biggest impact from the storm may be that it will exacerbate an already tight market for rigs in the region. As a sign of just how precious rigs are becoming to the market, The Woodlands=-based Anadarko Petroleum Corp., one of the biggest U.S. independent exploration and production companies, raised eyebrows in the energy industry earlier this week by committing to a rig six years in advance.
Oh, how times have changed in the exploration and production business.

Comparing planning for impending Gulf Coast threats

Houston skyline5.jpgJoel Kotkin is an Irvine Senior Fellow at the New America Foundation and is the author of The City: A Global History (Modern Library, 2005). In this Opinion Journal op-ed, he compares the disparate preparations of New Orleans and Houston to the two recent hurricanes, and makes several useful recommendations regarding planning for natural disasters and development of urban areas on the Gulf Coast, including the following:

[The Gulf Coast region], with the notable exception of New Orleans, is one of the fastest growing in the U.S. Its relatively low costs and balmy climate have turned it into the “opportunity coast.” Yet clearly the Gulf’s history has shown that ignoring nature has its perils. Few now remember Indianola, south of Houston. Until it was wiped out by hurricanes, first in 1875 and then again in 1886, it was Texas’s second-largest port. Today, most of that city lies under water.

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