Ivan! Jeanne! & Karl & Dennis The Menace & Katrina

Hurricane Katrina damage worse than expected
By Sheila McNulty in Houston and Carola Hoyos and Thomas Catan in London
Published: August 30 2005 20:24 | Last updated: August 30 2005 20:24

The damage from Hurricane Katrina has been worse than expected, initial assessments showed yesterday, 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.

Scores feared dead in Katrina's wake

Rescuers on Tuesday searched for survivors across the swathe of US Gulf coast devastated by Hurricane Katrina, with scores of people feared dead and tens of thousands left homeless.


In the US, Nymex crude hit $70.85, 5c higher than the highest price on Monday, and a new nominal high. Nymex gasoline futures hit a new record of $2.41 a gallon, up 35 cents.

The human toll of the hurricane began to emerge as flood waters subsided on Tuesday. 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.

Pricing pressure builds as oil majors count the cost of Katrina

As the oil industry on Tuesday assessed damage done by Hurricane Katrina to rigs, pipelines and refineries in the Gulf of Mexico, pressure continued to build on oil and gas prices.

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.

BBB, my husband said the same thing last night. We could use that money and those troops right here right now.