Thank you for that kind introduction. I’m delighted to be here today with all of you. Meetings like these are a great way to deepen the relationship between business and government, to make new friends, and to work on major global economic problems.
The energy crunch is one of the biggest economic challenges we face today. And it is one of the most complex because the global aspects of the problem are far more complicated today than they were 30 years ago, when OPEC controlled the market.
I was in New Orleans this summer before Hurricane Katrina struck, for meetings with Chinese and American energy leaders. We were there to talk about how we could work together to diversify energy supplies and share innovation. One of the hot topics was investing jointly to develop oil and natural gas fields in places like Russia, Canada, and Kazakhstan. What a contrast to the oil embargo days! To solve the energy problem, it’ll take strong and deliberate leadership, as Former Deputy Secretary of State Armitage talked about this morning. And it will require reducing foreign dependence by developing domestic resources, as you discussed a few minutes ago with Secretary Norton.
Obviously, the immediate challenge is recovering from Hurricanes Katrina and Rita. The aftermath of these back-to-back storms will be felt for months, if not years to come. Like you, all of us in government are still assessing the full impact they had on the Gulf Coast and the economy.
So what I’d like to do is focus on the economics of these storms, and how we’re responding, and then talk about the road ahead.
First, we’re fortunate that the U.S. economy remains strong … stronger than any other industrial nation … and this despite the historic challenges of the past five years, including: 2. Terrorists attacked us on 9/11, which deepened the recession that President Bush inherited.
3. Corporate scandals drove down public confidence.
4. Last year, four of the most destructive and expensive hurricanes in history struck the United States. Insured losses alone topped $25 billion.
5. And the global war on terrorism remains a major threat, as President Bush so graphically reminded the nation yesterday.
The economy grew 3.3 percent in the 2nd quarter. By contrast, growth in the European Union is averaging only 1.2 percent a year. Underlying employment trends remain positive, despite the job losses caused by Hurricanes Katrina and Rita. (Note: the September jobs report will be released this morning.) The Treasury Department estimates that our growth rate will dip about half a percentage point later this year because of the hurricanes. As I said, we don’t yet know the full impact of these storms. But we do know that rebuilding efforts will give GDP, jobs and the overall economy a lift by the first quarter of next year.
Energy prices continue to be a concern, as we all know. The higher prices caused by strong demand and hurricane-related supply disruptions are having an impact on the economy. People are worried about inflation.
But the macro-economic impact of higher energy prices is not as significant as it was 20 or 30 years ago because we’re more fuel-efficient. Overall energy efficiency in the U.S. increased nearly 50 percent over the past 30 years (as measured by btu per dollar of GDP). While economic growth averaged 3.2 percent over the past 10 years, energy consumption grew by just 1.2 percent a year. Most of the increased efficiency came in oil and gas use.
President Bush has taken a number of steps to alleviate tight supplies. He tapped the Strategic Petroleum Reserve to ease oil and gasoline prices. Gulf Coast oil and gas production continues to come back on-line, which will also relieve pricing pressures. The oil and gas shut-in numbers improved this week for the first time since production closed down as Rita approached. As of yesterday, about 80 percent of Gulf of Mexico oil production remains off-line (or “shut-in”) and about 65 percent for natural gas.
The President also ordered federal agencies nationwide to conserve on energy by curbing nonessential travel, encouraging workers to carpool and use mass transit, and shifting peak electricity use to off-peak hours. We hope industry will follow the federal government’s lead on conservation.
The President ordered a number of other measures to cut red tape and get the Gulf Coast energy industry back on its feet.
But one thing we don’t know yet for sure is the winter weather outlook.
The current forecast by the Commerce Department’s National Weather Service calls for a near normal temperature pattern for much of the country. This would be good news for the energy sector and for consumers. We’ll get a more definitive reading later this month when the Weather Service issues an updated forecast. So stay tuned.
Looking longer-term, President Bush’s new energy policy that he signed into law this past summer will reduce our dependence on foreign supplies, and encourage conservation. I’m confident most of you are aware of this new important legislation and how it will affect off-shore production.
All these measures should lessen the blow to our economy from Hurricanes Katrina and Rita.
But what will make the greatest difference to how the economy springs back will be how we go about rebuilding the Gulf area.
President Bush gave us the vision, a roadmap for helping people rebuild their communities, their businesses, and their lives. He made a pledge to do whatever it takes, and to stay as long as it takes, to make the region even better than it was.
Much has already been done.
2. Worker Recovery Accounts to help evacuees who need extra help. We will provide up to five thousand dollars that can be used for job training and education, and child-care expenses.
3. And an Urban Homesteading Act that identifies federal property in the region that can be used as homebuilding sites for lower-income citizens. Home ownership is one of the great strengths of any community and must be a central element for reviving the region.
In closing, let me pose a question. What will it take for Mississippi, Louisiana, Alabama and Texas to put the pieces back together? What will it take for devastated communities to rise again? I believe the key is in the private sector. The vibrancy of investment and the risk-taking by small and large businesses will create the jobs, the opportunities, and the hope that this great part of our country so desperately needs.
I know your industry will be investing hundreds of millions of dollars, if not more, to repair and replace damaged assets. On behalf of President Bush, I say thank you for everything you’re doing to get your Gulf operations back up and running.
We’re also very appreciative for an outpouring of corporate generosity. Many companies instinctively and immediately took action: So, we see great opportunity along the Gulf Coast. People need basic businesses. They need goods, services, and infrastructure. The business sector can meet those needs. In fact, today there may be no better place in the country in which to invest.
Ultimately, this is how we’ll rebuild and bring people back to the Gulf Coast.
Thank you.
Questions?
Source: U.S. Department of Commerce
