How Atlantic Hurricanes Influence The Price Of Oil
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The 2005 Atlantic Hurricane Season has been historic in many different ways. In terms of just the sheer number of storms, hurricanes, and major hurricanes, this season will go down as the busiest ever with 26 tropical depressions, 23 named storms, 13 hurricanes, and 7 major hurricanes. There were also three Category Five Hurricanes, which were among the strongest on record. It has been one of the deadliest with some 1,300 dead in Louisiana, Mississippi, Alabama, and Florida from Katrina, another 125 or so from Rita, and nearly 800 by Hurricane Stan in Mexico and Central America.

The economic toll from just Hurricane Katrina striking the Gulf Coast in August will surpass damage caused by many of the costliest hurricane seasons ever. Add to that the devastation from Dennis, Rita, and Wilma, and you have at least over $100 billion dollars in damage. Impacts have been so great to the United States economy that the prices of such commodities as oil and orange juice have gone up. Even Warren Buffett, one of the most prominent business tycoons in the world, cannot escape the impact from this hurricane season. The storms have also created political chaos as the Bush administration has been reeling ever since Katrina.



Facts About The Oil Crisis

The impact of this historic 2005 Atlantic Hurricane Season continues to be mind-boggling. Obviously the historical significance of the records that have been broken are reasons alone to get people talking. However, the real story is the economic impact left behind by the four hurricanes that made landfall in the United States: Dennis, Katrina, Rita, and Wilma. All four of these storms were major hurricanes with three of them peaking at Category Five intensity while the other one peaked at Category Four. In all, there were 6 named storms, 5 hurricanes, and 4 major hurricanes that made landfall along the United States coastline from Maine to Texas during the 2005 Atlantic Hurricane Season.

Katrina alone could ultimately cost $200 billion dollars, which would be nearly ten times more than the previous costliest natural disaster, Hurricane Andrew, which slammed into South Florida in August, 1992. Rita and Wilma added another $10 billion each, and Dennis chipped in with two billion. Industries such as oil, tourism, gambling, and citrus were all heavily impacted. The price of oil went over $3.00 per gallon in response to the devastation by Katrina and Rita. Wilma cost the Florida citrus industry to lose approximately $180 million dollars while the sugar industry suffered more losses from the third Category Five storm in 2005 than it did for all four hurricanes that hit Florida in 2004. Dennis also caused some minor disruptions as well. Katrina devastated the casino industry in Mississippi, which represented a large part of that state's economy, one of the poorest in the United States.

Wilma, which became the strongest hurricane ever recorded in the Atlantic, cost the hotel and tourism industry in Mexico a billion dollars as the storm relentlessly pounded hotels and beaches from Cancun to Cozumel for over 24 hours. It followed that up by giving parts of the Gold Coast of South Florida including Fort Lauderdale the worst. damage it has endured in 50 years. On top of all that, there is also the fact that New Orleans, which is a cultural center for many in the U.S., will have to take years to recover from the flooding that resulted from Katrina. Thousands of people displaced, and large numbers of people dead.

The United States wasn't the only country that suffered at the hands of tropical storms and hurricanes. Our neighbor to the south, Mexico, had its share of destruction this season as well. Hurricane Emily came ashore in the Yucatan and Northern Mexico while Wilma pounded the Yucatan Peninsula for over 24 hours before making its mark on South Florida. Hurricane Stan didn't have the fury of either Emily or Wilma, but it did cause some 71 deaths in Mexico as well as 654 in nearby Guatemala, and another 71 in El Salvador. Stan also cost some $1.8 billion dollars in damage in Mexico while El Salvador sufferred some $10 million in crop losses. Wilma caused another $1 billion dollars to the hotel and tourism industry with heavy damage to the resort areas of Cancun and Cozumel. Emily was responsible for some 64 deaths, and an estimated $300 million in damage.


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Oil And Hurricanes

Not even the rich and powerful have been immune to nature's fury in this 2005 Hurricane Season. President Bush's administration has been in free fall since Katrina came ashore in Louisiana. One administration official had to resign while another was caught seriously unprepared as FEMA and the Department of Homeland Security terribly mismanaged the recovery efforts in the wake of Katrina. These two departments also didn't fare too well with Rita and Wilma as this year's crop of storms exposed serious flaws in the United States ability to protect its people from disaster whether man-made or natural.

The Oracle of Omaha wasn't immune either Recently, it was reported in the New York Post that Warren Buffett's company, Berkshire Hathaway, one of the wealthiest companies in America and the world, suffered a near 50 percent drop in its third quarter earnings compared to the same time last year. Owning major insurance and reinsurance companies, which have their hands full in dealing with the devastation caused by these four storms in addition to the damage caused by the four hurricanes that hit Florida in 2004, Buffett's company lost $554 million in earnings this quarter, or about $358 dollars per share.


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The Consequences For Oil

Buffett, who has also been involved with think tank projects such as the Nuclear Threat Initiative, has suffered as Berkshire Hathaway has lost approximately $3 billion dollars in hurricane related losses according to a recent filing with the Securities and Exchange Commission. The head of Berkshire-Hathaway, who is the second most wealthiest man behind Bill Gates with an estimated $40 billion dollars, is invested in such insurance companies as Geico and General Re. Buffet has also suffered losses this year as a result of the resurgence of the U.S. Dollar against foreign currencies.

Berkshire Hathaway's shares still went up after Katrina's devastating impact on New Orleans. According to Bloomberg.com, the stock outperformed the S&P 500 as they rose some 6.5 percent. Underwriting losses nearly quadrupled from $215 million to $1.17 billion as the destructive impact of both Katrina and Rita became obvious. Although Buffett's assets are over $196 billion including $90 billion in shareholder equity according to a market analyst, the losses incurred this quarter are nothing to sneeze at, and more importantly, have provided additional proof that you don't have to live directly on the coast to suffer from the impact of a hurricane or tropical storm.

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