Katrina, Rita likely to wallop your wallet

/ Source: CNBC

Katrina and Rita are reaching for your wallet.

Prices at the pump, the cost of natural gas and electricity prices are all soaring. And they’re likely to head even higher thanks to the one-two punch of Hurricane Katrina and Hurricane Rita — an economic body blow that will have millions earmarking a much bigger chunk of the family budget for energy this winter.

“We’re going to see huge price increases, particularly for Midwestern home owners this winter; and if it’s a cold winter they will be really hurting,” said energy analyst Peter Beutel of Cameron Hanover. “They are already looking at price increases of 40 to 80 percent,” he added, noting that natural gas prices are one and a half times higher than a year ago.

“If we pass on the full extent of national gas prices they could be double their level last winter,” Beutel said.

Natural gas is the killer for energy consumers. Prices have skyrocketed since Katrina knocked out a fifth of the Gulf Coast's production, and they will jump even higher because of Rita.

On average, home heating bills are expected to be up a staggering 47 percent nationwide — 50 percent or more in the Northeast, 60 percent in the West and as much as 80 percent in Florida.

“It’s way too early to say what this current hurricane in the gulf will do to prices, but it looks like natural gas will be high at least through this heating season for sure,” said Chuck Holiday, CEO of chemical firm Dupont.

At the pump, analysts say the nightmare of $3 a gallon gasoline will become a fond memory as $4 gasoline becomes a possibility. And the $50 it took to fill up a SUV at the start of summer will turn into as much as $85.

“The old record high could become tomorrow's bargain,” said Sean Comey, a spokesperson for AAA. “It’s already gone from bad to worse and its going to get even worse before this is done,” he said.

Higher energy prices are already taking their toll at the mall. The American Research Group recently tracked a 16 percent plunge in retail sales after Labor Day, the steepest drop in 26 years.

The U.S. economy has already been soaked by Katrina and Rita, and the impact looks set to linger long after the flood recedes.