SPECIAL SERIES : Hurricane Katrina
Hurricane Katrina's Economic Impact
How Bay Area is affected
September 15, 2005 7:22 PM
Hurricane Katrina shut down a national center for oil importation, production, and refining, eliminating 10 percent of the nation’s oil supply.
Rising gas prices have financially crippled trucking companies, steel manufacturers, and airlines.
Delta and Northwest Airlines declared bankruptcy a week after the destruction, citing rising fuel prices.
PG&E announced they were raising their fees, possibly as high as 40 percent, during the heavy heater usage in winter.
And while Bay Area trucking companies are the primary victims of the high cost of energy, many local transportation agencies remain unaffected, and in a few cases, optimistic. Economists here are cautious, and say it’s still unclear how much Hurricane Katrina will directly affect the Bay Area economy.
Analysts say that the reason some Bay Area industries haven’t felt Katrina’s impact is because the consequences haven’t fully begun yet. They warn that what’s bad for the economy nationally will be bad for the Bay Area‘s bustling export industry, the second most valuable exporting region in the country.
Todd Ewing, managing director of the San Francisco Center for Economic Development, says that if the GNP falls, the Bay Area can expect a decrease in demand for its exports (GNP is the total market value of all final goods and services the country produces).
“Any downturn could have a damaging effect on what has been a fairly resilient economy,” Ewing said.
Ewing was unsure whether the GNP would fall significantly. But the hurricane has already worsened a crisis in the trucking industry.
L & A Trucking and Three Ladies Trucking, two Bay Area trucking companies, have already gone out of business. Most trucking companies in the region struggle to break even.
“Fuel prices are sky-high,” said Bill Aboudi, operations manager for Alpha Bravo Trucking. Before the hurricane, the company was barely making a profit because California already spends 30 - 40 cents more per gallon than most of the country.
This latest price increase has completely eaten their revenue.
“We were already getting screwed. Now we’re just getting screwed harder,” Aboudi said.
Alpha Bravo has been forced to charge a 20 - 25 percent fuel surcharge to their clients, a charge which has already lost them several clients.
Their problems are worsened by a busy exporting and importing season, which is forcing trucks to wait in long lines just to pick up their shipments.
Aboudi recalled an incident on Sept. 12, when one driver waited in line for a whole day, and didn’t even receive the shipment he was waiting for.
Pacer International, a national cargo-shipping agency, is also charging a fuel surcharge: 17.5 percent for railroad transport, and 22 percent for trucking. And it takes longer for the company to move shipments in the southeast.
But the company has not been too negatively affected, and executives here have optimism for future business opportunities.
“In the long-term, there might be a boom for the transportation industry,” said Larry Yarberry, the company’s chief financial officer. “We’re going to have to ship a lot of lumber, steel, furniture, and other materials to the area.”
Public transportation systems in the Bay Area were barely affected.
“We’ve had problems with fuel since the beginning of the year,” said Christine Dunn, public information director for Samtrans and Caltrain. “The price hasn’t spiked because of Katrina. It’s just continuing to rise steadily.”
Dunn said there will be no further raise in fares or any other change in the system to compensate for higher fuel prices caused by Katrina.
“The clear rise in energy costs may be distributed among many areas, said Bruce Kern, executive director of the Bay Area Economic Development Alliance for Business. “We might even see a cooling down of consumer spending. Right now it’s pure speculation.”
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