Isaac, now a Category 1 hurricane that could become a Category 2, will have some effect on the U.S. economy even if it does not make a direct hit on a major city.
Damage estimates to residences have risen has high as $39 billion, which will trigger large insurance claims. All of the oil platforms in the eastern portion of the Gulf of Mexico have been evacuated, which almost certainly will drive the price of oil higher temporarily. WTI crude prices have moved up by 1% today to more than $97. Business activity and tourism will be hurt along the beaches from Florida to Texas.
And perhaps more important is that Isaac could move across New Orleans, which never has completely recovered from Hurricane Katrina. The effect could only be a small fraction of a percent of gross domestic product, but in a rough economy, every tiny fraction of harm counts.
Douglas A. McIntyre
Filed under: 24/7 Wall St. Wire, Economy, Oil & Gas