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Making money off misery

By Nicole Colson | September 9, 2005 | Pages 6 and 7

THE OIL giants didn't miss a moment in making a quick buck off of people's misery. The industry responded to Hurricane Katrina by hiking gas prices at the pumps last week.

The South was hit the hardest. Outside Atlanta, gas prices approached an incredible $6 a gallon last week--before state officials took action to force them back down.

On average, the price for regular unleaded gas spiked more than 6 cents, to $2.68 a gallon, just from Wednesday to Thursday, according to the American Automobile Association--44 percent higher than one year ago. But in many parts of the country--especially cities--prices shot past $3 a gallon, and show no signs of coming down. On a single day last week, the Energy Department reported more than 5,000 calls to its price gouging hotline from around the country.

Oil industry flacks claimed that the hurricane had damaged U.S. refining capacity, leaving them no choice but to raise the cost of gas. But with pump prices jumping 30 to 50 cents a gallon in a single day in some places, the industry explanations ring hollow.

In fact, while the price of crude oil spiked for a short time after Hurricane Katrina hit the Gulf Coast, it had fallen below where it had been before the storm, as Socialist Worker went to press. Besides, the gas coming out of pumps today comes from crude oil that was purchased, refined and delivered long before Hurricane Katrina hit.

Some companies--like Marathon Petroleum--have been caught red-handed. Marathon was forced to admit that it had hiked prices too much--after raising them 45 cents in a single day.

As oil companies and distributors blame retailers for setting prices too high, and retailers blame the oil companies and distributors, consumers are the ones who pay the price. "There is no doubt in my mind whatsoever that this is gouging," Pennsylvania resident Sonny Knight told the Allegheny Times last week as he waited to fill up his gas tank at a cost of $3.19 a gallon. "But I have no choice. Some things in life are necessary. I don't think anyone will do anything about it," Knight added, "because we have a president that every time he opens his mouth, he lies."

How insurance bosses will get off scot-free

WITH ESTIMATES of insured losses ranging from $20-35 billion, Hurricane Katrina could be the costliest disaster in U.S. history. But while the media focuses on the billions that insurance companies will pay out in the coming months and years, they'll ignore the vast numbers of people who have no hope of getting a settlement to rebuild their lives.

"Total losses--insured losses plus uninsured losses--are often double the insured loss, and...flood losses are generally not covered by homeowners' policies," insurance industry analyst Donald Thorpe told the Washington Post. As Edward Pasterick, a senior adviser at the Federal Emergency Management Agency (FEMA), told Knight Ridder, "We're estimating now for the affected areas, maybe 40 percent of the people have flood insurance."

As always, it means that the biggest losses will fall on those who can least afford them: the poor and working class who couldn't afford insurance and flood coverage to begin with. According to FEMA statistics, at the end of 2004, there were just 41,912 federal flood insurance policies in Alabama and 42,320 flood policies in Mississippi. Louisiana had 380,192 policies, but only 83,990 of them were in the hardest-hit areas of New Orleans and Orleans Parish (or county).

With an estimated 1 million people left homeless in the wake of Hurricane Katrina, the vast majority of those whose homes have been damaged or destroyed will have no money coming to help them make a new start.

Some insurance executives seem almost happy that the levee system around New Orleans failed--since it allows them to write the losses off as "flooding," for which a majority of homeowners have no coverage, rather than as "hurricane damage."

"The definition of flood is fairly ironclad," said Robert Hartwig, chief economist with the Insurance Information Institute in New York. "It's essentially water that comes from below. The fact that a government-run levee fails and creates a flood doesn't create a liability for private insurers. I would say in dollar terms, at least among homes, the majority is related to floods."

Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, said, "It's truly outrageous that these companies would try to draw the line that way. The bean counters in the insurance industry should not be allowed to prevail. Any Katrina survivor that's told that they aren't covered because it's a flood and not a hurricane should get together with their neighbors and caravan to [the emergency command center in] Baton Rouge to let the politicians know."

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