Canadian shippers won’t escape Katrina’s economic wrath

NEW ORLEANS — The economic impact from Hurricane Katrina, which has devastated the city of New Orleans and parts of Mississippi, is sure to be felt as far as Canada.

Shortly after news reports placed Katrina’s impact in perspective as one of the worst natural disasters the U.S. has faced, the price of crude rose above $70 a barrel on Monday — a new record. Although it dipped slightly to $69 shortly afterwards it climbed back up to $70 again yesterday as the markets remained jittery about the future of the Gulf Coast’s refineries and oil rigs.

Almost every shipper in Canada is paying a fuel surcharge and many carriers have been cranking up those surcharges as fuel prices have been rising throughout the year. Fuel surcharges are representing almost 25% of truckload costs for some shippers in certain lanes. With the latest hike in prices that can only get worse and it may be long term.

The region is key to America’s oil infrastructure and it appears to have suffered significant damage and disruption.

Seven offshore drilling platforms were shaken off their moorings by the storm, according to the latest reports. Oil companies have sent tugs to pull them back into place. So devastating was the impact of Katrina’s 135 mph winds and 25-foot storm surge than an oil platform torn from its moorings in the Gulf, beached near Dauphin Island in Alabama.

A significant chunk of refining capacity is offline, Jack Legler, director of emergency planning and response for the American Trucking Associations Highway Watch, said.

The hurricane will also cause significant disruptions to supply chains. And the disruptions are certain to continue for days after the initial impact of the hurricane.

Unlike Hurricane Andrew, the last major hurricane to hit New Orleans, the damage is not restricted to the residential districts. It spread across the city and includes its business district and port infrastructure. With about 80% of New Orleans submerged and the damage felt as far as Mississippi, the region’s road infrastructure area has been compromised with flooding and toppled concrete bridges. Many roads remained impassable a day after the hurricane hit. The I-10 was shut down to all but emergency vehicles.

The U.S. Coast Guard closed all ports from New Orleans to the Florida Panhandle ahead of the arrival of Hurricane Katrina. It ordered all commercial vessels and barges greater than 200 gross tons not approved to remain in port to leave.

New Orleans acts as a hub for industrial supplies headed to southern U.S. and containers being marshalled across the country. But the hurricane forced major rail operators to halt freight traffic in and out of New Orleans, resulting in delayed shipments of chemicals and coal.

Efforts are under way to marshal the transportation industry toward relief efforts, however. The rail companies report moving supplies such as generators and chain saws to the area. The trucking industry is working with state police to coordinate trucks and supplies.

But the damage from the storm is not yet over. Yesterday two levees burst in New Orleans, flooding the city.
When the floodwaters rose they drowned backup generators. Nearly three million people were still without electricity and drinking water on Tuesday.