The economic damage from Sandy, which meteorologists and scientists dubbed “Frankenstorm” before and during her strike on the Northeastern U.S. Monday, will likely take months to calculate.
Mississippi State University economists said Tuesday that, like the storm surge in Manhattan and along the Jersey Shore, Sandy’s financial impact could be historic. Part of that will be the losses incurred by the New York Stock Exchange’s closure Monday and Tuesday.
“It’s very rare for the markets to close, even for a weather event,” said Mike Highfield, associate professor of finance and head of Mississippi State University’s Department of Finance and Economics.
The last time markets closed due to weather was 1888. Officials announced Tuesday morning that they would reopen Wednesday.
Based on history, Highfield said the reopening could produce less-than-desirable results. “Many times we see a fall when the stock market does reopen, mainly because of the event itself which caused the closure.”
Because Sandy made landfall among the heavily populated Eastern Seaboard – New York City got a direct hit, and Washington, D.C., and Philadelphia were heavily impacted – Highfield said an economic loss of $20 billion just in property dame is possible. Factor in loss of tax revenue from wages, lost work time, and a general loss of commerce, and that figure could rise to $60 billion, he said.
That could make for a short-term economic slide, but it could also present investors with opportunities in the industries that support rebuilding. That was the case along the Gulf Coast after Hurricane Katrina, spurred mainly by Gulf Opportunity Zone Bonds.
Sandy’s death toll as of Tuesday morning had climbed over 30. “In the long run, it may be somewhat of an economic shot, but it will take several, several months. In the meantime, there is a lot of agony and sadness from a human point of view,” Highfield said in a school press release.
If the storm’s track made it potentially more expensive, it could also lead to good news within the oil and gas industry. Gas prices soared in the immediate aftermath of Katrina. That probably won’t be the case with Sandy, said Jon Rezek, associate professor of economics and director of Mississippi State’s international business program. Sandy did nothing to cause supply interruption at any of the Gulf Coast’s 54 refineries. The Northeast is home to only six such facilities.
“For the most part, gasoline will flow from a lot of the refineries down here to the rest of the country, with fairly minimal impact in terms of a price increase,” Rezek said. “In total, these facilities in the Northeast refine only about 6 percent of the country’s crude oil. Given the relative lack of refining capacity in the Northeast, a supply disruption there over the next few days will not likely cause near the disruption that Gulf storms have on national or regional gasoline prices.”
Tuesday, the price for a barrel of benchmark crude oil rose 55 cents to $86.09. The average price for a gallon of gas fell one cent, to $3.53, more than 11 cents cheaper than two weeks ago.