Hurricane Ian is poised to become one of the most expensive hurricanes in U.S. history.
The economic losses and damage in Florida could total $45 billion to $70 billion, according to Chuck Watson, a disaster modeler and director of research and development at Enki Research. That would rank as the sixth most expensive hurricane on record.
In the coming weeks, Florida and the broader national economy might have to face a wide range of other financial consequences.
One could be the damage to crops and fertilizer-manufacturing areas. The futures market is already responding, with the November frozen concentrate orange juice futures surging by more than 5 percent to $1.9225 per pound on the U.S. ICE Futures exchange on Sept. 28.
Mosaic Co., a Tampa-based phosphate and potash miner and fertilizer producer, represents about half of North American farmers’ supply of fertilizer and 12 percent of the global supply.
As Ian travels north, the storm might also negatively affect cotton and soybean production.
Fuel challenges are also expected to arise across the state. In a note to its customers, Florida fuel supplier Mansfield Energy Corp. increased its supply alert level to “code red” for Florida. This means that it will require a 72-hour notice of new deliveries as pre-hurricane demand uses up inventories.
Energy prices are also rising in response to Hurricane Ian, which has strengthened to a Category 4 storm. November West Texas Intermediate (WTI) crude oil futures rallied by about 2 percent to more than $80 per barrel on the New York Mercantile Exchange. Refinery issues and the latest hurricane events have contributed to the national average price for a gallon of gasoline rising for eight consecutive days, topping $3.76, according to AAA.
The storm made landfall on Sept. 28 on Florida’s southwest coast, packing 150 mph maximum sustained winds, and some areas, including Tampa Bay, could endure “catastrophic flood and life-threatening surges,” Florida Gov. Ron DeSantis said in a Twitter post. Ian has become the second most powerful hurricane to travel across the Atlantic this month after Hurricane Fiona caused immense damage, flooding, and power outages over portions of the Caribbean and Eastern Canada.
But how have other hurricanes compared in the past?
The Price Tag of Hurricanes—Past and Future
According to data from the Office for Coastal Management, hurricanes have resulted in more than $1.1 trillion in damage since 1980, averaging about $20.5 billion per phenomenon.
For the United States, the costliest storms in history have been Category 5 Katrina ($186.3 billion), Category 4 Harvey ($148.8 billion), Category 5 Maria ($107.1 billion), Category 3 Sandy ($81.9 billion), and Category 4 Ida ($78.7 billion), according to the National Centers for Environmental Information.
There are other economic costs associated with hurricanes as well. In September 2017, hurricanes Harvey and Irma caused the U.S. economy to lose 33,000 jobs because the storms shut down thousands of businesses in Florida and Texas. Moreover, 1.5 million people were unable to work because of the weather.
This satellite image shows Hurricane Ian off Florida's southwest coast on Sept. 28, 2022. NOAA via AP
Ian could affect thousands of companies in Florida, including 7,000 health care-related firms, more than 4,500 factories and warehouses, and as many as 2,800 manufacturing companies, according to estimates from Freight Waves, a provider of global supply chain market intelligence.
In April 2019, the Congressional Budget Office projected that annual economic losses from most types of damage triggered by hurricane winds and flooding could total $54 billion per year. That includes $34 billion in household losses, $12 billion for the government, and $9 billion for commercial entities. Some losses would also result from household repairs, business revenue losses, and government spending on recovery activities.
“Those expected economic and budgetary costs represent average one-year costs based on current conditions for climate, sea levels, and property development in places at risk of severe storms,” the nonpartisan budget watchdog wrote. “The estimates are based in part on large-scale commercial models that simulate damage from hundreds of thousands of potential storms that might occur under current conditions, along with their probability of occurring.”
Rushaine Goulbourne, a former research associate at the Brookings Institution, wrote in October 2021 that stronger and more frequent hurricanes could threaten job growth in coastal counties.
“The reduction in job growth is driven by physical damage to businesses and the services necessary for operation (e.g., power, water, transportation networks). Storms also temporarily suppress demand for some goods and services, such as luxury goods and tourism,” Goulbourne said. “Making insurance claims and applying for financial assistance is difficult, particularly for small businesses, characterized by lower revenue and employment numbers. These delays in operation cause many small businesses to fail.”
The U.S. Government Accountability Office (GAO) assessed the post-hurricane economy and employment numbers in September 2020. It found that some of the deadliest hurricanes on record have altered economic activity and total employment levels in affected counties and metropolitan areas.
Although average economic activity had normalized within one year of the hurricane, total employment numbers were mixed in many affected places, GAO research found.
“Total employment was lower than expected in the month of the hurricane or some of the three subsequent months in 80 of the affected counties GAO analyzed,” it wrote. “Total employment was higher than pre-hurricane employment on average in 47 of those counties within one year, but remained below pre-hurricane employment on average in the other 33 counties for at least one year.”
In the fragile post-pandemic economy, an active hurricane season may produce an even worse situation for the nation, from higher food prices to tighter energy inventories. Some are concerned that another hurricane with the magnitude of Andrew or Katrina could lead to different, long-term consequences for the United States in the current economic landscape.
Andrew Moran
Author
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
