Louisiana governor calls for evacuation of New Orleans
Financial Times | August 31 2005
By Sheila McNulty
Kathleen Blanco, governor of Louisiana, called on the city of New Orleans to evacuate as waters continued to rise. ”We absolutely must evacuate the people in the dome and other shelters in the city,’’ she said on CNN. ”It’s a logistical nightmare.”
The US military on Wednesday added Navy ships, including two helicopter assault vessels and the hospital ship Comfort, and search troops to a relief effort in the wake of Hurricane Katrina.
US authorities were battling to shore up heavily damaged levees in an effort to save New Orleans from almost total submersion as the city, 80 per cent of which lies below sea level, fills with water.
Police are struggling to contain widespread looting and officials fear the lack of basic sanitation or fresh water will lead to disease.
In Mississippi, authorities put the death toll at 100, but said they expected the number to be much higher as search and rescue operations continued.
In the markets, by mid-morning in London on Wednesday, Nymex West Texas Intermediate was again creeping back towards the nominal record high of $70.85 a barrel hit on Tuesday as speculators expected US oil inventories to be squeezed. WTI for October delivery stood at $70.50 a barrel, up 69 cents from Tuesday’s close. Gasoline futures moved up more than 3 per cent to $2.57 a gallon, also a new record.
The damage from Hurricane Katrina has been worse than expected, initial assessments showed on Tuesday, prompting a new rise in oil prices to record levels and raising concerns about the cost of insurance in the Gulf of Mexico.
Industry sources said that one big underwriter had already stopped providing business-interruption insurance in the Gulf and others warned that rising storm losses would lead to premiums so high that insuring platforms could become uneconomic.
Damage assessments on Tuesday suggested that it could take a week to restart refineries hit by the hurricane at a time when supplies already are tight.
The commercial impact will continue to be assessed on Wednesday as stores and businesses struggled to clean up after the hurricane. New Orleans Mayor C. Ray Nagin said in a television interview that about 80 per cent of the city was flooded.
Louisiana Governor Kathleen Blanco said “miles and miles of homes“ were under water. “Some neighborhoods will need total rebuilding,“ she said.
Retail stocks traded lower on the New York Stock Exchange on Tuesday as traders considered the cost of lost business.
Wal-Mart said on Tuesday that 70 of its stores were still closed on Tuesday afternnon, down from 123 earlier in the day.
Merrill Lynch said in a research note the impact on retailers was likely to be broad based as consumers trimmed spending if petrol prices rose further. “We do not anticipate a wholesale retrenchment, but we could see more trading down and less discretionary expenditures,“ Merrill said.
Other commodities felt the impact on Tuesday, as cotton futures settled at three-week highs after the hurricane lashed fields in Alabama and Mississippi, while coffee prices rose sharply after Katrina damaged coffee warehouses in New Orleans.
There are fears that the human death toll may rise into the hundreds as search and rescue teams extend their operations on Wednesday. Haley Barbour, governor of Mississippi, said at least 80 people were feared dead in his state alone, while in New Orleans, Louisiana, bodies were seen floating in the floodwater. Local officials declared martial law in New Orleans and south-east Louisiana to assist with the relief effort.
George W. Bush, president, cut short his holiday to return to Washington on Wednesday to help monitor federal efforts to help the rescue and reconstruction effort. “We've got a lot of work to do,” he said.
More than 1m people between Louisiana and Florida were left without electricity and power companies said it could be two months before service was fully restored.
Some companies estimated it might be a week or longer before they resumed refining operations in the area hit by the hurricane that blew through the heart of US oil country on Monday.
“If we can put offshore production up again, but we have no refineries, the oil will be worthless,” said Adam Sieminski of Deutsche Bank.
Initial reports point to sustained outages at several refineries in Louisiana and Mississippi. Nine refineries in the two states are shut, reducing capacity by 1.774m barrels of crude oil a day, about 9 per cent of the US's total capacity.
The extent of the damage to underwater pipelines and anchoring systems was unknown but the discovery of at least two rigs that had broken their moorings indicated the probable extent of the industry's problems. Insurance companies estimate the damage from Katrina could be $26bn almost as much as the total from last year's four hurricanes in the Gulf. Oil companies have become increasingly vulnerable to hurricane losses as they move further offshore into the Gulf of Mexico.
“A lot of underwriters are reviewing their positions in that area, deciding whether they want to write the business,” said Tim Fillingham, who runs Aon UK's energy practice.
Insurance analysts on Tuesday put the insured losses at anything between $12bn and $25bn.
“It is likely Hurricane Katrina will be the largest insured loss from a single event since the terrorist attacks of September 11, 2001 and the largest US hurricane loss since Hurricane Andrew in 1992,“ Fitch Ratings said.
Standard & Poor’s said the storm was likely to hurt third-quarter US GDP, shaving a few points off its forecast of 3.7 per cent growth. However, it noted that building and other repairs to hurricane-related damage in Florida, Mississippi, Louisiana and other affected regions should boost GDP in subsequentquarters.
Additional reporting by Richard Beales in New York