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Great Hurricane Katrina Coverage on CNBC

Most news about hurricane Katrina is understandably focused on the immediately-affected areas. And it's full of attention-grabbing video and soundbytes that aim to project the magnitude of the damage and the resulting human suffering.

This is a "thank you" note to CNBC for their less parochial coverage. I live thousands of miles from the affected area, so the specific details of the devastation are not very interesting to me. But I am interested in the farther-reaching effects of Katrina.

CNBC has been doing a great job providing information I'm actually interestd in. Here are a few things I learned by watching a portion of the 8/30 broadcast of Closing Bell over lunch:

  • The Louisiana Offshire Oil Port is in good shape and will be able to transport oil soon after electricity is restored.
  • Approximately 10% of the nation's oil refining capacity was shut down due to Katrina. Some refineries are flood-damaged or unreachable.
  • There's speculation of tapping the Strategic Petroleum Reserve. (This would only be helpful if the damage to oil producing facilities is greater than the damage to oil refining facilities.)
  • All ports in the area of the lower Mississippi will remain shut down for many days. This includes import/export shipping through the Mississippi. Commodity deliveries will be interrupted.

The economic impact of Katrina will be very large, but I want to emphasize how well markets will adapt to this. Giant corporations like Wal-Mart and Home Depot are determined to re-open their stores as soon as possible, providing much-needed supples to people in the region. The enormous logistical task of moving these materials to the areas where they are needed will be solved by private individuals motivated by profit. Shortages in the immediate aftermath will give way to general and widespread availability of goods as giant profit-hungry corporations race to beat each other in reopening their stores and selling everything that people need. Price gouging, if allowed, would hasten the end of shortages.

This will occur without political posturing, without playing favorites, without interest groups tripping over each other in adulation and bribery of politicians who might grant them a special allocation of some important good while making a speech about how important rebuilding is and how wonderful that their administration can help, vote for them.

In the rest of the country, we will see higher fuel, transportation, and commodity prices. These price adjustments will prevent shortages by reducing total demand, and the available supply will be directed toward its most important uses. But most people don't have to worry about it. You won't see any change except slightly higher prices for a few weeks or months. People involved in commodities and logistics will have more to worry about, but it's their profit-motivated job to solve these problems, and their solutions will help all of us. We won't even have to ask.

Tiny Island