Sunday, September 14, 2008

Ike Thankfully Does Not Do Its Worst

The worst-case scenario of damage from Hurricane Ike did not occur, Texas Gov. Rick Perry said hours after the storm slammed ashore early on Saturday, carrying with it a wall of water that flooded hundreds of miles of coastline.

"Fortunately the worst-case scenario that was spoken about, that was projected in some areas did not occur, particularly in the Houston Ship Channel," Perry told a briefing in Austin, Texas, monitored on local television.

Ike, a massive hurricane that idled close to a quarter of U.S. oil production, made landfall on the barrier island city of Galveston as a strong Category 2 storm at 2:10 a.m. CDT with heavy rains and sustained 110 mph winds, the National Hurricane Center said.

Before the storm, U.S. and state officials had worried about a 20-foot wave that could inundate the barrier island city of Galveston and pour inland into the Houston Ship Channel which is lined on both sides by refineries and petrochemical plants. One of the major business worries was that the storm surge could cause great damage and impair the restarting of the oil production activities.

"Rather than 20-foot surges (we had) 14- to 15-foot surges," Perry said.

For that reason, Port Arthur, a major port and oil refining city east of Galveston that was severely damaged by Hurricane Rita in 2005, was spared substantial disruption, he said.

"The good news is that the surge was nowhere near as large as we thought it was going to be from the standpoint of impact. But there's plenty of damage out there," Perry said.

More than half of Galveston's 60,000 residents fled, but the fate of those who stayed to ride out the storm remained unclear.

David Paulison, administrator of the Federal Emergency Management Agency, said more than 120 people had been rescued in Galveston so far.

Effect on Business

Although Ike is believed to have inflicted billions of dollars in damage, relieved officials and residents said the monster storm the size of Texas appears to have been less destructive than originally feared.

Galveston and the Houston Ship Channel were not hit as hard as expected. Emergency officials had predicted a 20-foot storm surge that could have caused far greater damage and swamped refineries. Galveston City Manager Steve LeBlanc said 17 buildings had collapsed on the historic island, a favorite for beach-loving Texans, and the causeway linking to the mainland had buckled.

Ike did trigger the biggest disruption to U.S. energy supplies in at least three years and sent gasoline prices higher at the pumps. Prices in Northeast Atlanta jumped to more than $4 per gallon on Saturday.

Oil refineries along the western shore of Galveston Bay and Port Arthur may have been spared the worst of the flooding, said Brad Penisson, a spokesman for the joint operations of southeast Texas emergency management agencies.

Ike could lead to $8 billion to $18 billion in insurance claims, according to an early computer-model estimate of damage by the industry. Ike was the biggest storm to hit a U.S. city since Hurricane Katrina devastated New Orleans in 2005.

It was not clear if Houston would resume business -- including its big energy trading operations -- by Monday. With close to 4.5 million people without electricity it may be a few days before Galveston and Houston start to get back on-line. Thankfully, there have been no confirmed deaths from the storm.

Depending on the speed of getting the oil refineries back on-line, gasoline prices could drop as quickly as they rose. One observer believed it would be a week or two before most operations fully resumed. One reason for the delay was the lack of manpower and electricity due to the storm.

Sources: Reuters, Bloomberg, AP, Yahoo

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