Library - Cengage
Introduction: In 2005, Hurricane Katrina devastated large parts of Louisiana and Mississippi and disrupted production at gasoline refineries located there. What were the economic effects? The following clip from Good Morning America discusses some of these effects. See if you can identify some of the economic questions raised by Katrina.
07:43:23 CHARLES GIBSON
(OC) So should people rethink their Labor Day plans? AAA's Justin McNaull is joining us from Washington, D.C.
GRAPHICS: HURRICANE KATRINA
GRAPHICS: YOUR HOLIDAY TRAVEL PLANS
07:43:32 CHARLES GIBSON
(VO) Justin, uh, Dan just said people are prepared to pay. But I think the question that they have on their minds is, will gas actually be there? Do we have reports of shortages? And are they spot shortages or throughout the country?
07:43:46 JUSTIN MCNAULL, AAA
We certainly had some reports of outages, isolated outages. At times, it could be a couple of dozen stations in a city that have had problems. But when you look at the broader picture of the U.S., certainly, 90 percent or more of gas stations have product. Unfortunately, there's no one who has a real high level view to see exactly how many stations are out at any one time. But the vast majority of stations do have gasoline. And really, what we're finding, though, is there's a sense of a bit of panic that some motorists are feeling. And that's the reason that we're seeing people go out and gas up in quantities and in volumes that we normally wouldn't see people doing. There's ample gas at most gas stations, to go ahead and make sure that there's fuel for everyone. But it's just like with a snowstorm. If we all rush out and buy milk and we buy a loaf of bread, we can create a shortage when there normally wouldn't be one.
07:44:29 CHARLES GIBSON
(VO) Let me ask you about a, a subject that economists study and, and about which there is great discussion, which is, as prices go up, as you see $3.20, $3.40, $3.60 a gallon at the pump, do people actually cut back? That's called elasticity in price. But do people tend to cut back when the prices get up to these levels?
07:44:48 JUSTIN MCNAULL
Demand for gas is highly inelastic. In the past, we've seen gas prices shoot up 20, 50 cents without much impact on the travel. Uh, before the storm, in the gas price run-up, we were expecting, uh, Labor Day travel to stay basically even, despite prices that were up, at that point, 70 cents. But it really is hard to tell, as we look at prices, like here, where you're well over three dollars, exactly how motorists are going to respond to it
07:45:09 CHARLES GIBSON
(VO) And any chance people will get to the airports and my flight may be cancelled because the airlines don't have fuel?
07:45:17 JUSTIN MCNAULL
There's been a little bit of concern, initially, on that. However, the airlines have some pretty good responses to it. If you're flying from Milwaukee to Atlanta, for example, where there's a concern about having enough jet fuel in Atlanta, they'll just load up in Milwaukee to have enough fuel to do the return trip. So it's a fairly sophisticated system that they have here, certainly to get them through the next week or two, as the refineries and the pipelines get back on board.
07:45:35 CHARLES GIBSON
(OC) All right, Justin McNaull, I appreciate you being with us this morning with some good information. Thanks for being here.
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