Hurricane Gustav Facts, Damage and Costs
Hurricane Gustav was a Category 2 storm when it hit the Louisiana shore on September 1, 2008. It cost $8.0 billion, including $6.0 billion in U.S. damages. Gustav's death toll was 112 people, including 11 in the United States. It indirectly caused another 41 deaths in Louisiana. Some died from the tornadoes that the hurricane caused. Around 1.5 million people were without power.
Impact on Oil Industry
Gustav devastated the oil industry. It caused an estimated loss of $8 billion to $10 billion in oil production. All Gulf offshore oil rigs and Louisiana land-based oil refineries were shut down in advance. Shipping was suspended. That included of 5.6 million barrels of crude oil. That's 56 percent of the imported oil that enters the Gulf every day.
Louisiana produced 22 percent of America's domestic crude oil and 10.5 percent of its natural gas. People were concerned because Hurricane Katrina had caused oil prices to rise $3 a barrel. That's because it affected 19 percent of U.S. oil production. Hurricanes Katrina and Rita destroyed 113 offshore oil and gas platforms and damaged 457 oil and gas pipelines. They spilled nearly as much oil as the Exxon Valdez.
Damage to New Orleans
As important as these industries are, the huge concern was the damage Gustav could do to New Orleans. The city was just recovering from Hurricane Katrina, which hit three years earlier. Tourism had just returned to 7.1 million visitors. In 2006, the visitor level was only 2.6 million. New Orlean's port had suffered $260 million in damage.
Fortunately, Gustav's damage to the city was much less. There was only minor flooding, downed trees, and scattered branches.
Impact on GDP
After Hurricane Gustav hit in September 2008, the economy contracted. The nation's gross domestic product fell 8.2 percent from October through December. Real GDP was just $14.557 trillion. No one was surprised. In November, the Dow fell to 7,552.29 from its 14,164.53 high set on October 9, 2007.
But that was not caused by the Gustav. The hurricane hit during the worst recession since the Great Depression. Any economic impact by the storm was lost in the economic freefall. Global financial markets nearly collapsed. For more, see 2008 Financial Crisis Timeline.
On the other hand, Hurricane Katrina sent GDP growth down to 1.3 percent in Q4 2005. It had been 3.8 percent in Q3. However, since the economy was still growing strongly, by Q1 2006 GDP growth bounced back to a robust 4.8 percent.
Gustav could have been worse. At its height, Hurricane Gustav was a Category 4. But it lost power as it headed through the Gulf of Mexico. The Louisiana Economic Development Department estimated it could have cost $5 billion in that state alone. Gustav was headed for the heart of Louisiana's sugar industry. Its crop value was $500 million, according to the American Sugar Cane League. This area of Louisiana had 50 chemical plants, which produced 25 percent of the nation's chemicals.
The nearby Mississippi coast was home to 11 casinos, which take in $1.3 billion annually. The state estimated could have cost $4.5 billion to $10 billion in property damage. This included:
- $2 billion to $4.5 billion for homes, autos, and other personal property,
- $1 billion to $2.5 billion for business property,
- $1.5 to $3 billion for damage to agriculture, timber, and fisheries, as well as public facilities.
(Source: AP, "Gustav's possible economic hit is widespread," August 31, 2008.)
Comparison to Other Hurricanes
Gustav was less destructive than two other storms that hit Louisiana. In 2005, Hurricane Katrina flooded New Orleans. Its death toll was 1,836 people and cost $108 billion in damage.
Two weeks after Gustav, Hurricane Ike hit. It was the third costliest hurricane in U.S. history, after Katrina and Hurricane Andrew. Total U.S. property damage was $30 billion, six times greater than the damage from Hurricane Gustav.