The Effects of Natural Disasters on the Economy

From fuel costs to inflation, natural disasters pose a threat to the United States economy. Fortunately, activism promises a solution.

Posted on 10/28/18
By Admin | Via ViewsWeek
(Photo by Wickedgood, CC license)

You can live thousands of miles away from a natural disaster and still suffer its effects. Sunny weather and a clear forecast in your area may promise safety, but this is somewhat superficial. When a hurricane tears across the coast or a wildfire consumes entire communities, it has profound consequences for the nation’s economy.

 

The repercussions are so significant that in 2017, natural disasters cost the United States economy a record $307 billion. With the looming threat of climate change causing unseasonable weather, fluctuating temperatures, and a higher frequency of flooding and droughts, the issue will remain relevant for years to come.

 

So how are the climate and the economy interwoven? How do extreme weather events disturb trade, production, and distribution? We’ll explore those fascinating questions and more, detailing the close and curious relationship between the environment and the industries that sustain society, starting with…

 

Consequences for Fuel Costs

One of the primary places you’ll feel a natural disaster it is at the pump. Fallen power lines and failed infrastructure can compromise transportation, making fuel shipment from place to place a perilous process. A decline in supply and availability inevitably leads to an increase in prices, especially for smaller distributors.

 

However, the subject of shifting gas prices and home heating oil costs is far more complicated. All across the globe, different individuals and organizations determine the market value of this essential commodity. Dozens of different variables factor into the final calculation, as illustrated in the infographic below.

 

[SOURCE WITH INFOGRAPHIC]

Consequences for Farming

To see a clear example of the correlation between natural disasters and the economy, a little digging into the past uncovers the link. In the 1930s, the worst drought in 300 years all but demolished the agriculture industry in the United States. The dry soil couldn’t yield crops, and so it was blown away in the wind.

 

The exact opposite would happen in 2011 with the Mississippi River flood. Since the river ran past farmland, production and delivery suffered a significant blow, with rising waters causing disorder and disruption in the process. After final calculations, the total economic damage came to an incredible $2 billion.

 

Consequences for Currency

More than fuel and food supply, natural disasters also cause both inflation and deflation in U.S. currency. The devastation of houses and other assets often results in an increase in spending, both from insurance companies responding to the claims of their customers and governments making repairs to infrastructure.

 

But while new money enters the economy, the destruction of paper assets, like those associated with a stock market crash, cause deflation. A fall in stock prices has a negative impact on wealth, decreasing the supply of money. The value of the currency is always in flux during turbulent times and shifting weather.

 

Looking at the Big Picture

A hurricane is far more powerful than its wind and rain. A wildfire is far more powerful than its heat and flames. The environment has a significant impact beyond inclement weather conditions, and staying safe indoors can’t protect you from the many secondary and tertiary effects of a natural disaster.

 

In an unpredictable economic and political climate, the actual climate is yet another worry. But with the collective effort of committed individuals and the initiatives of dedicated organizations, forward progress is possible, benefitting both the planet and those who call it home. And that includes you.

 

From fuel costs to inflation, natural disasters pose a threat to the United States economy. Fortunately, activism promises a solution.

 

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