Reply #72: Katrina shows U.S. economy's vulnerabilities-Rebuilding effort should help

[54anickel]

Rebuilding effort should help, but energy impact seen severe

http://www.msnbc.msn.com/id/9132279/

Even as emergency workers and others slosh through the soaked, debris-strewn streets of New Orleans and other areas torn up by Hurricane Katrina, some economists fear American policy-makers will take the wrong lesson from the storm and ignore America’s larger vulnerabilities.

Katrina’s “immediate effect will be a bump in gas prices of maybe 20-25 cents a gallon -- although that might be mitigated now the Bush administration has released some crude oil from the Strategic Petroleum Reserve. But the price of gas is going higher anyway,” said Stephen Leeb, president of Leeb Capital Management.

With gas prices already at record highs, a further jump is likely to have a negative impact on the U.S. economy.

The more serious issue, Leeb argued, is how quickly one strong storm can tip America’s energy needs at a time when global oil supplies are tight and getting tighter.

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Despite this, other observers note that the billions of dollars of devastation wrought by Katrina will be offset by billions in reconstruction activity.

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So, the question is whether the various authorities will use the emergency funds to build affordable housing or if developers will buy that land to build expensive housing, he added.

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