BOXING DAY’S Asian tsunami had nothing to do with global warming. The damage caused by Hurricane Katrina was probably not caused by man-induced climate change either. Like the floods that have hit parts of Central Europe, however, the Louisiana disaster is consistent with the predictions of those who argue that excessive burning of fossil fuels will bring environmental catastrophe. More Americans are now likely to think that the finger waggers are right.

By unhappy coincidence, the damage to refineries and pipeline facilities has caused a short-term shortage of petrol (gasoline), exposing raw American nerves. This combination of events may bring both market and policy changes that affect business and consumers far beyond the devastated area.

As America draws stocks from its strategic reserve, this week’s record wholesale prices for petrol should come down. But they will remain high for months, at least, and bigger US petrol imports are already transferring higher prices to Western Europe and beyond.

In New England, America’s more moralistic North East, a group of states recently imposed Kyoto-type targets on themselves. They want to freeze and maybe cut emissions of carbon dioxide, chief suspect for the claimed greenhouse effect. Neither the southern states nor the Midwest seemed likely to take this initiative seriously, let alone join it. There will now be a livelier debate. More states will fret about power stations and vehicle (if not aircraft) emissions, even if they do little about it.

This combination of price signals and changing attitudes will probably be the tipping point for sales of hybrid petrol-electric vehicles, leading to mass production and lower unit costs. In the short term, at least, that will be bad news for General Motors and Ford, which are already struggling to find anything as profitable as big sports utility vehicles.

If petrol rises above £1 per litre in Britain, which is still more than 2.5 times as much as in America, the switch to more fuel-efficient cars and newtechnology vehicles can only accelerate. Trends will be reinforced on the Continent and in Japan. America’s latest omnibus Energy Bill has given a fillip to fuel cell technology, which is close to commercial breakthrough. It tipped its hat to nuclear power but we could see further moves in this direction, perhaps to help breeder reactors, which are uneconomic at today’s uranium prices. France, which depends heavily on conventional nuclear power, is now earning a dividend in lower oil-induced inflation than its neighbours.

Inevitably, the main US effort will be to rebuild, protect against future hurricanes, plan larger refining capacity and gain better access to crude oil. Today, that is bad news for guards of Venezuela’s Hugo Chavez, America’s awkward-squad oil supplier. Years ahead, US success in finding oil and cutting demand will determine oil price trends. We may also see a lot of US farm land given over to forestry to absorb carbon dioxide or grow fuel crops.

Japan’s Kobe earthquake of 1995 was widely forecast to help the country’s output recover momentum through reconstruction work. Instead, the loss of output depressed the stagnant economy even further. This should not happen in America, where economic expansion looks robust. Vast amounts of federal and private capital will be made available. But there will be complications.

Commercial insurance losses are one. The leading global reinsurance companies provide one of the most attentive audiences for debates on climate change. Their own businesses record a menacing upturn in losses from natural disasters. It is not easy to distinguish between the trend in natural events and the far more rapid increase in valuable property that is liable to be destroyed. Insurers are, however, profoundly conscious of the relation between the two.

Rebuilding communities that have become uninsurable is not so easy, unless the US Government assumes virtually all risks. What is true on the Mississippi Delta is equally true in the Thames estuary or the flood plains of the Trent, Severn, or Aire. Insurers will enforce more cautious development policies, whatever governments may think, just as insurers have driven action against smoking in workplaces.

Washington economic managers will be scratching their heads. The last thing a country with huge budget and trade deficits needs is a boost to government spending on goods. The dollar may suffer if the Federal Reserve Board, in transition between Alan Greenspan and Mr X, feels it should go a little softer on interest rate rises while private spending is disrupted.

If America catches the global warming bug, however, the impact of Katrina on the world economy will be much greater.

graham.searjeant@thetimes.co.uk

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