Hurricanes, Refineries and How Oil Prices Could Afftect Post-Katrina Reconstruction
I got a glimpse of the future on Saturday when I stopped in to a Sheetz gas station in Northern Virginia. For those of you not familiar with Sheetz, it's one of those chains that generally has around two dozen pumps to choose from -- and every last pump had a piece of plain white paper taped to it, each with the hastily scrawled words "Out of Gas."
In the past, I have seen a station out of 87 octane or one pump cleaned out of 93, but never have I seen two dozen pumps all completely dry. The only explanation we got from the clerk was this: "The supplier has no gas." When I asked when more fuel was expected to arrive, he shrugged.
The Sheetz shortage may not last long, since Rita didn't pack the punch many had anticipated -- see Earl Bockenfeld's Radio Weblog for a map of refineries and roundup of analysts' chatter on this. But when the next big hurricane hits that very vulnerable piece of coastline, what if a number of refineries do suffer extensive damage?
More importantly, since this week's Debate is about rebuilding, what do gas prices have to do with anything? The answer: plenty.
Higher oil prices mean higher costs of building materials -- both in production and, more importantly, in freight. Wood that might otherwise have been harvested locally will have to come from farther away due to storm damage. Naturally, where building costs were to be paid for or subsidized by the federal government, any price hikes will be passed onto taxpayers.
And those able to get jobs in reconstruction will be hit doubly hard by rising fuel prices, because they'll already be at risk of making less than they otherwise would thanks to the suspension of the Davis Bacon act. Writes columnist Harold Meyerson: "the prevailing wage that Bush's Labor Department has designated for the Gulf region averages about $9 an hour. For more highly skilled carpenters in New Orleans, the prevailing hourly wage rises to $13.75 -- which means that if a New Orleans carpenter is lucky enough to work 40 hours a week for 50 weeks a year, he or she will have a princely pretax annual income of $27,500."
Another big problem with higher fuel costs? For the poor -- particularly the elderly -- not being able to afford heating oil can be life threatening. A lot of displaced people are just going to be getting back into houses and apartments come this winter, and money will be tight enough without worrying about how to keep warm. The governor of New Mexico has the right idea -- he is proposing rebates to offset heating costs, which one of the Free New Mexican readers comments at the end of the story is better than suspending the gas tax, which "is simply a subsidy to the gasoline companies."
(More about those gas taxes in the next post.)
Paul Krugman writes in the New York times that "America's current state of mind reminds me of the demoralized mood of late 1979, when a confluence of events -- double-digit inflation, gas lines and the Iranian hostage crisis -- led to a national crisis of confidence." (Here's the link, but don't bother to click unless you want to fork over the $50 for one whole year of the privilege of reading Times columnists.)
The Post's Sebastian Mallaby also suggests taking a "moment to recall the lesson of the 1970s" -- that piling on the debt will only worsen the "oil shock." In case you're looking for more reasons to be nervous about rising gas prices, Mallaby's got you covered.
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