While the damage caused by Hurricane Katrina in parts of Mississippi, Louisiana and Alabama is far away, some Bahamian professionals on Wednesday predicted that the fierce storm could likely cause adverse economic effects in key sectors in The Bahamas.
There are rising concerns that the fuel supply disruptions from the storm could have a ripple effect through the region.
In the United States, gas prices climbed higher on Wednesday as refineries and pipelines remained crippled.
Garner Dawkins, president of the Petroleum Retailers Association, said that local dealers are certainly watching the impact Katrina is having on fuel supplies.
“Based on buying at the time and loading of the product we just hope that it just does not go up too much higher,” Mr. Dawkins said.
“Fuel in our region comes from Venezuela,” he explained.
“But what ends up happening is that regardless of where it is shipped from the Organization of Petroleum Exporting Countries [OPEC] are the ones who set the price. So regardless if it is coming from Saudi Arabia or the Gulf or South America, or as far as Africa it depends on what the OPEC nations set the barrel of crude oil to be.”
A barrel of crude oil costs about $70 a barrel.
Mr. Dawkins maintained that at present the oil pricing is ridiculous and insisted that for the time being retailers are simply hoping for the best.
“From the start of the most recent war in Iraq they were trying to bring the barrel of crude oil under $30. So you are looking at within two years oil prices have moved from $35 to now in excess of $70,” Mr. Dawkins said.
“It is beyond crunch time and at this time the only thing that we can do is conserve fuel. Drive necessary trips only, have the cars tuned up, tyre pressures checked, make sure that the car is running properly and just hope that we get through this,” Mr. Dawkins said.
The ripple effects are also expected to affect shipping costs as local shipping companies scramble to find more efficient ways to fund rising fuel costs.
Kristoff Lingier, country manager of Seaboard Marine, told the Journal Wednesday that his company does not want to impact the market too severely, but will definitely have to increase the cost of freight due to soaring fuel costs.
“The only impact that we have from Hurricane Katrina regards fuelﾅwe have problems finding enough fuel to supply our vessels to keep our vessels in service,” Mr. Lingier said.
“I donﾴt think it will interrupt our service, but it is not making the job any easier.”
Mr. Lingier said his company has been swallowing the cost of fuel for quite some time.
“We have been absorbing the difference of $20 for a while now,” he said.
Meanwhile, President of the Life Underwriters Association Dwayne Pearce said while premium increases are likely, at this point, he does not believe that consumers should be alarmed.
“What really happens with general insurance is that it is really a pooled entity both locally and internationally,” Mr. Pearce said.
“To a larger extent, something that happens in the Gulf, for instance in the Louisiana and Alabama area does not have a direct impact, but it has a contingent impact over the pool reserves and the pool resources of premium and reserves through the entire insurance market, which is really one global market with all premiums and re-insurance premiums being pooled in from a corporate standpoint thus affecting rates locally and internationally.”
Despite the massive devastation abroad, Richard Parker, business development manager at J.S. Johnson, said it is too early to tell whether premiums will increase.
But he said it is certainly something to worry about.
Mr. Parker said that while no information is flowing from international re-insures about premium hikes, consumers should keep their fingers crossed.
“Rates are really assessed from an annual standpoint and an annual fiscal year as it relates to hurricanes and those rates are reviewed sometimes at the end of November, early December,” Mr. Parker said.
“I think essentially it would be premature to make any statement on whether there would be any increase because this is early hurricane season and one cannot tell what will happen as the months go on.”
Mr. Pearce, meanwhile, said consumers must protect their interests by accessing their homes and businesses on an annual basis or have them appraised so that they can have enough insurance coverage.
Royanne Forbes-Darville, The Bahama Journal
