The Economics of Hurricane Sandy: Money and Weather

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Hurricane Sandy, bearing down on the eastern seaboard – Image Credit: NASA.

Hurricane Sandy’s wide swath of damage means that the areas in its path are suffering the ‘Trick’ rather than the ‘Treat’ this Halloween.

The monstrous “superstorm” unleashed its fury on Atlantic City, New Jersey, making landfall on October 29th.

Although nowhere near the strength of notoriously damaging hurricanes such as Katrina (2005), Andrew (1992), Ike (2008), Wilma (2005) or Charley (2004), Sandy, nevertheless will inflict its wrath on the scale of potentially tens of billions of dollars to the northeastern United States.

Why? To quote Carl Sagan: “You have to know the past to understand the present.

Thus, to set the table, the following are the five most expensive hurricanes on record.

#5: Hurricane Charley (2004) — $8.76 billion

Charley was deemed a “small but powerful” hurricane in a National Oceanographic and Atmospheric Administration 2006 report. The damage inflicted by Charley reached $8.76 billion, the fifth-most expensive hurricane on record.

#4: Hurricane Wilma (2005) — $11.68 billion

Unlike Charley, Wilma was both massive andpowerful, striking Cozumel, Mexico on October 21, 2005 after having seen maximum winds reach 185 miles per hour. Counting damage to Cancun, Cozumel and southern Florida, the storm’s economic impact has been estimated at $11.68 billion.

Hurricane Ike was financially devastating – Image credit: NOAA.

#3: Hurricane Ike (2008) — $13.05 billion

Originating as a tropical disturbance off the west coast of Africa in late August, 2008, Ike strengthened quickly into a tropical storm the next day, and reached hurricane status by September 3rd. Ike’s overall economic impact was the third highest on record at $13.05 billion.

#2: Hurricane Andrew (1992) — $22.9 billion

Hurricane Andrew – Image credit: NOAA.

Andrew almost wasn’t a history-making storm, as it encountered wind shear four days before smashing into Florida as a Category 4 hurricane, nearly dissipating. Andrew was the third-most intense hurricane ever to hit the United States – its damages have been estimated at $22.9 billion.

#1: Hurricane Katrina (2005) — $46.6 billion

Literally the mother of all storms, we are all painfully familiar with the cataclysmic damages Katrina caused as it lashed the city of New Orleans with a near bulls-eye strike on August 28, 2005. Katrina’s large size, 20-30 foot storm surge and proximity to the below-sea level New Orleans caused the greatest amount of economic damage by a natural disaster in U.S. history: $46.6 billion.

Why the Storms Cause So Much Damage

Although all hurricanes have the potential to be devastating, unique factors led to each of the top-five storms listed above. Unlike most storms, Charley was actually increasing in intensity as it struck, likely catching many by surprise, given that the city was preparing for a Category 2 hurricane. Furthermore, it dumped up to eight inches of rain on some cities, spawned nine tornadoes, and had a storm surge of over seven feet. Wilma was both very large and extremely powerful. Ike struck a direct blow to Galveston, Texas, a city (much like New Orleans) extremely vulnerable to a storm surge due to its low elevation. Hurricane Andrew was by some measures the third most intense storm ever to hit the United States, and Katrina was huge, powerful and — like Ike — struck at the wrong place at the wrong time.

No one factor, by itself, will determine the ultimate destruction caused by a hurricane. The Saffir-Simpson scale may have very little to do with their ultimate economic impacts. To wit: Hurricane Sandy.

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