How Do Natural Disasters Affect the Economy?

This year, we seemed to go from one devastating hurricane to the next.

Texas got clobbered, then Florida, then Puerto Rico. Many people lost everything. The good news is that far fewer died than in years past, when we didn’t have the technology to give us advanced warning.

The worst part of the hurricanes is the damage they cause and the lives they destroy. Victims find themselves grateful to be alive, but then have to deal with the reality of losing their homes or livelihood. These losses take a painful, long-lasting emotional toll on people. And while they are suffering, they have to find a way to rebuild their lives.

When hurricanes destroy everything, they also throw off the balance of supply and demand and wreak havoc on local and global economies. When crops get wiped out in Florida, or oil refineries can’t operate in Texas, prices go up all over the country and in worldwide markets. Natural disasters affect us first by destroying our lives, homes and properties, but the economic impact is both immediate and long-term.

Harvey

Tropical Storm Harvey put many refineries in the Gulf Coast out of commission. These plants are unable to turn oil into gasoline for our cars, jet fuel for our planes or any of the oil byproducts we use. You will see gas prices rise, and they will likely stay higher until production is restored. The price of airline tickets will also increase, and since trucks bring food to your stores, so will the prices of groceries. Business owners have no choice but to pass the increased cost of doing business on to the consumer.

Refineries that are not shut down are operating at a reduced rate. Employees of the refineries have been affected by the flooding and may not be able to return to work until their homes are restored.

Port closures in the region mean refineries that are still in operation can’t always ship their product. An estimated one-fifth of the country’s refining capabilities was affected by Harvey, resulting in a market reduction of about 1.1 million barrels per day of gasoline.

Thousands of local residents remain stranded after the storm. It’s estimated between 30,000 and 40,000 homes were destroyed by Hurricane Harvey. All those people need shelter, food and clothing. It will take a long time before they are in their own homes again. For some, it may not be financially possible.

Irma

After ravaging many Caribbean islands, Hurricane Irma hit the Florida Keys as a Category 4 storm. Wind speeds were upwards of 130 miles per hour, causing heavy rain, destruction of property and widespread flooding. More than half of Florida residents lost power. It’s estimated the destruction in Florida will cost more than $50 billion.

The citrus industry and other Florida crops were pummeled by the destructive storm. Florida farmers lost somewhere between 80 and 90 percent of their crops. Irma knocked over greenhouses, flooded pastures and brought down established fruit-bearing trees. This damage will affect our food prices, as well as our ability to export food to other countries.

Maria

Hurricane Maria leveled much of Puerto Rico, an American territory that gets much of its income from the tourism industry. Not too many people will be booking trips to Puerto Rico anytime soon. That’s less money for the industry, but also less money for all the local businesses and restaurants that depend on tourist dollars.

Puerto Rico also has some 50 pharmaceutical plants and exports 25 percent of the American pharmaceutical market. Those plants are shut down until further notice, which will affect supply and prices of many types of medication.

Nameless, but Deadly

Some disasters don’t have names attached to them. While Category 4 Hurricane Joaquin threatened to ravage the East Coast two years ago, a separate, unnamed weather pattern crept ashore and caused a “1,000-year rainfall” in the Carolinas. In early October 2015, South Carolina and southern North Carolina got between 12 and 20 inches of rain. This caused rivers and creeks to overflow and wash out roads and bridges. Breached dams caused major flooding in both states. Damage estimates range in the billions of dollars. Nineteen people lost their lives.

The chances of this much rain falling on the Carolinas again is between 0.1 and 1 percent — in other words, somewhere between 100 and 1,000 years. Of course, those unlikely odds don’t mean much to the people who lost everything in the floods.

In the Carolinas flooding, most people didn’t have flood insurance because they weren’t in what was considered floodplains. The contents of their homes had to be removed and usually discarded. Carpeting, flooring and wet drywall had to be stripped and discarded. This damage had a horrible financial toll on families across the states.

No matter where hurricanes hit, our entire country is affected by them. We depend on each other for goods and services, and when those get held up or destroyed by the weather, it affects our economy. Our citizens lose their possessions and homes — sometimes even their lives. We have to do everything we can to help make our citizens’ lives whole again, and to restore our local and worldwide markets.

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