The heavy toll of damage caused by Hurricane Harvey continues to mount, with Louisiana braced for more of the torrential rains that caused devastating floods in Houston, Texas.
Estimates of the cost of damage reached as much as $160bn today, as analysts struggled to get to grips with the scale of the destruction.
At least 31 people have died in the flooding after record rainfall, according to US reports, with the toll expected to rise further in coming days.
The Houston metropolitan area – the fifth largest in the US – has had as much as a quarter of its economy pushed offline, according to Gregory Daco of Oxford Economics.
That massive disruption will knock as much as 0.3 percentage points off real US GDP growth in the third quarter, he predicted, although the final toll will not become clear until the effects of the storm have passed.
“It may have broader and deeper consequences,” Daco added.
Global commodity markets have felt the impact of the hurricane, with the spread between prices for West Texas Intermediate crude oil and Brent crude from the North Sea reaching a two-year high this week.
Almost 4m barrels per day of refining capacity – a fifth of the US total – were out of action this evening as 20 refineries closed down or reduced operations, according to the US Department of Energy.
Shell boss Ben Van Beurden today described Harvey, now downgraded to a tropical storm, as a “major event” for the London-listed supermajor, in comments to the BBC. Houston is one of the global hubs for the oil and gas industry.
Joel Myers, founder of weather forecaster Accuweather, today put the total price tag at $160bn, according to US media.
Meanwhile, David Havens, managing director at New York-based Imperial Capital, estimated the likely figure will be $100bn, making financial losses similar in scale to Hurricane Katrina in 2005, which remains the costliest hurricane to strike the US.
“It is such an extreme event – an event in some ways of a magnitude on par with Katrina,” he told City A.M. Costs are “definitely trending up”, he added.
Total costs may have doubled since Monday as the devastation spread, according to Chuck Watson, director of research and development at consultancy Enki Research. Damage may be as high as $75bn, he said, mostly caused by “historic and unusual flooding”.
Christian Jaccarini, an economist at the Centre for Economics and Business Research, estimated the damage at $40bn, and noted the destruction of capital could reduce output.
The US National Weather Service predicted further heavy rains will hit Louisiana over the next three days. As the hurricane returned inland, insurers were grappling to work out their exposures.
“Right now, no-one has a clue. Most people haven’t got lights yet, most of it is underwater and it is an ongoing situation,” said Jonny Creagh-Coen, head of investor relations at insurer Lancashire.
“The devastation is very widespread,” he added. “This loss will take an awful long time to adjust and you’ll see a lot of trapped capital.”
Barrie Cornes, head of research at Panmure Gordon, said: “If it starts shutting down oil production, it can get very expensive.
“At the moment it is certainly very containable in terms of insurers.”
Analysts also highlighted insurers will not pick up the majority of the economic losses because of US state-backed flood protection schemes, similar to Britain’s Flood Re insurance.
“I think that most of the flood losses will be picked up by the flood programme or the state,” said Peel Hunt analyst Andreas van Embden, who estimated insurers would be slapped with a bill between $4bn and $12bn.
Cornes declined to put a specific number on overall losses but added: “If the economic loss is $100bn, as some people are saying, then the insured loss is about $20bn to $25bn.”