The economic effects of Hurricane Katrina, which hit Louisiana, Florida, Texas and Mississippi in late August 2005, were far-reaching.
In 2006, the Bush administration sought over $100 billion for repairs and reconstruction in the region, making the storm the costliest natural disaster in US history. This does not account for damage to the economy caused by potential interruption of the oil supply and exports of commodities such as cotton. Before Hurricane Katrina, the region supported approximately one million non-farm jobs, with 600,000 of them in New Orleans. One study, by Mark Burton and Michael J. Hicks, estimated the total economic impact to Louisiana and Mississippi may exceed $150 billion. Hundreds of thousands of residents of southern Louisiana and Mississippi, including nearly everyone who lived in New Orleans, were left unemployed. No paychecks were being cashed and no money was being spent, and therefore no taxes were being collected by local governments. The lack of revenue will limit the resources of the affected communities and states for years to come. Before the storm, the region was already one of the poorest in America with one of the highest unemployment rates.
There was also some concern when, on September 8, 2005, President Bush temporarily suspended the Davis-Bacon Act in the affected areas, which allowed for contractors working on Federal construction projects to be paid less than the prevailing local wage. The concerns over these actions were primarily that allowing the government to pay less than the prevailing wage would contribute to increased poverty in the region, which already ranked among the lowest in the nation in terms of household income. The act was later reinstated on October 26, 2005, amid political pressure from both Democrats and Republicans in the United States Congress.
Oil production
The storm interrupted oil production, importation, and refining in the Gulf eden, thus having a major effect on fuel prices. Before the storm, one-tenth of all the crude oil consumed in the United States and almost half of the gasoline produced in the country came from refineries in the states along the Gulf's shores. An additional 24% of the natural gas supply is extracted or imported in the region. Furthermore, the nation's Strategic Petroleum Reserve is also stored in this region.
Power outages in the wake of Katrina have also caused distribution problems for oil and natural gas. Pipelines which move petroleum products from places like Houston to areas of the east coast have had their flows interrupted because power outages shut down the pumps that kept materials flowing. Dick Cheney personally called the manager of the Southern Pines Electric Power Association on the night of August 30 and again the next morning and ordered him to divert power crews to substations in nearby Collins that were essential to the operation of the Colonial Pipeline, which carries gasoline and diesel fuel from Texas to the Northeast.
At least twenty offshore oil platforms were missing, sunk, or had gone adrift, according to the United States Coast Guard. One oil rig, in dock for repairs before the storm, broke loose and hit the Cochrane/Africatown USA road bridge over the Mobile River in Mobile, Alabama. Two others went adrift in the Gulf of Mexico, but they were recovered. One platform, originally located 12 mi (20 km) off the Louisiana coast, has washed up onshore at Dauphin Island, Alabama. Shell Oil Company's MARS platform, producing around per day, was also severely damaged.
At 7:03 a.m. CDT on August 29, Ted Falgout, Port Director of Port Fourchon, Louisiana, a key oil and gas hub 60 mi (100 km) south of New Orleans on the Gulf of Mexico, reported that the port had taken a direct hit from the hurricane. The port services approximately 16% of the nation's supply of crude oil and natural gas. According to Falgout, Hurricane Katrina, "will impact oil and gas infrastructure, not just short term but long term as well. The impact of the storm — the Gulf is shut down; all of the area of the storm is shut down; a half billion dollars a day of oil and gas is unavailable."
The Louisiana Offshore Oil Port, which imports 11% of all U.S. oil consumption, closed on August 27, and Shell reported a reduction in production of . The port was undamaged by the storm and resumed operation within hours of getting power back.