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Goldman Sachs: $30 billion in Harvey destruction and refinery disruptions will hurt GDP

  • Goldman Sachs sees "property damages in the range of $30 billion" from Harvey in Texas.
  • More than 16 percent of the nation's oil refining capacity has been shuttered, said the Goldman commodities team.
  • The center of Harvey has moved off the coast but is expected to track back inland over southeast Texas on Wednesday.
A woman uses a coat hanger to try and retrieve an item from a destroyed house after Hurricane Harvey struck Fulton, Texas, August 26, 2017.
Rick Wilking | Reuters
A woman uses a coat hanger to try and retrieve an item from a destroyed house after Hurricane Harvey struck Fulton, Texas, August 26, 2017.

Goldman Sachs sees "property damages in the range of $30 billion" from Harvey in Texas, and a reduction in overall U.S. economic growth due to storm-related energy disruptions.

"We estimate that disruptions in the energy sector could directly reduce Q3 GDP growth by as much as 0.2pp [percentage points]," Goldman said.

The Goldman commodities team estimates Harvey and its lingering effects in the Houston and Galveston, Texas, areas have shut down more than 16 percent of the nation's oil refining capacity.

The rains from Harvey continued early Tuesday in many of the flooded-out areas.

The center of the storm, which originally made landfall late Friday, has moved off the coast but is expected to track back inland over southeast Texas on Wednesday, according to forecasters.

Over the next several days, periods of torrential rain were expected over Texas and Louisiana.

Gasoline and oil futures, however, were steady Tuesday morning.

On Monday, gasoline prices surged nearly 2.75 percent on supply concerns, while oil prices fell by about that same percentage on worries that demand for crude by refiners would decline.

Harvey-related energy disruptions in the U.S. will likely complicate OPEC efforts to rebalance the oil market, according to a Barclays note Tuesday.

Meanwhile, Goldman's $30 billion projection for property damage would make Harvey the ninth-worst U.S. hurricane since World War II in terms of destruction.

However, Goldman remains uncertain whether damages and energy disruptions, in addition to other negatives associated with powerful storms such as a "temporary slowdown in retail sales, construction spending, and industrial production, as well as a pickup in jobless claims" would impact economic growth in the second half of 2017.

"The negative effects are likely to be offset [in the near term] by an increase in business investment and construction activity once the storm has passed," Goldman said.

On Monday, JPMorgan pegged eventual insured losses from Harvey in the $10 billion to $20 billion range.

By comparison, many estimates say Hurricane Katrina in 2005 caused about $50 billion in insured losses in New Orleans and other flooded areas in Louisiana, Mississippi and Alabama.

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