Creating a whole sector.

Just the fact that natural disasters occur actually creates a whole sector of the economy. Due to the fact that most natural disasters are re occuring in certain areas, such as tornadoes in the central US, earthquakes along fault lines, and hurricanes in the Carribean, these areas have industries soley to prepare for upcoming disasters. In certain areas disaster proofing homes, by modified foundations and structural designs, has created a new type of industry in house production. As well natural disaster preparedness has increase sales of related stock supplies, such as medical supplies, water purification tablets, and fuel for generators. This creates the need for a whole new sector of the economy, while promoting already existing industries by creating derived demand for their supplies, such as building supplies. For information on a company in California doing this I have attached the following link:

http://www.californiaacontractor.com/

Oil and Gas Production

There has been a lot of talk about the effects on small businesses, but I started researching some of the larger effects a natural disaster can have. So I looked into how they can affect oil and gas production. Hurricane Katrina for example had quite an effect on the oil and gas production in the Gulf of Mexico. The normal production in the Gulf of Mexico is 547.5 million barrels of oil and 3 trillion cubic feet of gas annually. After Hurricane Katrina Oil production fell by 1.4 million barrels a day, which accounted for 95% of the daily production. And 34% of production of natural gas was decreased. Along with decrease in production, they were also loosing oil, from the oil spills that were equivalent to almost 4 million gallons of oil. And on top of that there were an approximate total of 109 oil platforms and 5 drilling rigs that were either damaged or destroyed due to the hurricane. Clearly this natural disaster had a negative effect on oil production and businesses dealing with the production of gas and oil. This information along with more pictures of the effect of Hurricane Katina can be found at:

http://srb.stanford.edu/nur/GP200A%20Papers/jolene_mccaskill.pdf

Today I have found that the effect of natural disasters on an economy is profondly different depending on the size of your economy. As previously stated, neighboring countries economies stand to gain when a country is hit by disaster, such as the Haiti earthquake, because of reconstruction or aid contracts. This only stands true in small economies, such as Haiti. In smaller economies when a disaster hits it destroys most capital goods, and infrastructure leaving it helpless to fix itself and necessary for foreign aid to rebuild, because the reconstruction contracts will be given usually to foreign companies there will be no economic boost felt locally from the disaster. Where as in a larger economy, such as the US economy after Hurricane Katrina, reconstruction and aid contracts can be awarded locally adding a short term economic boost. Also, smaller economies suffer more long term losses as there GDP are impacted alot greater. The president of Haiti reports his country as having lost 35-50% of its GDP, while the American economy was not even greatly effected by Katrina. This illustrates how a the effects of natural disasters are minimul in a large economy due to it's ability to correct the problem internally, but are extreme on smaller economies usually dooming them to a slow economic recovery. If you would like to read on this in more detail please read the following articles:

http://www.abc.net.au/news/stories/2010/02/26/2830727.htm
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/03/AR2005090301195.html

Natural Disaster's can stimulate neighbouring economies.

Nadine is right in her observation that natural disaster's adversly effect the local area in which they occur, but natural disaster's can actually promote the economies of countries that provide relief as many government contracts are then passed to civilian agencies. Also, donations from private citizens to non-profit's are then usually used to pay for contracts non-profits have with companies. The US government alone has awarded over 15 million dollars in contracts, in the wake of the earthquake in Haiti, and after looking at a list of recipients almost all of them are US based corporations. This information can be found at https://www.fpds.gov/fpdsng_cms/ . Also US based private security contractor's will stand to make a lot of money, companies such as Triple Canopy, and Xe (Formally Blackwater), are already bidding for work in the Carribean region. This is directly related to the fact that after Hurricane Katrina, Blackwater alone had 150 men on the ground first day, making natural disaster's a very profitable industry for the private defense sector. Some interesting articles i have come across on the subject are:

http://www.govexec.com/story_page.cfm?articleid=44466&dcn=e_tma
http://www.propublica.org/article/u.s.-private-security-firms-head-to-haiti-121

How natural disasters affect international affairs

Another way that natural disasters can affect a business is through the effects it causes on international affairs. The Haiti disaster resulted in a demand for certain products, especially the ones being exported to effected countries will drop sharply as the suffering people could no longer pay for those products. The country may also have been a producer of a component that was manufactured in a different country before disaster struck. Since it no longer can produce its part, the item can no longer be manufactured in a quantity as large as before or not be manufactured at all. As a result businesses will suffer and many jobs will be lost.
Also the communication system in Haiti was severely damaged by the earthquake. Businesses from other countries who deal with commercial establishments with Haiti are unable to communicate to conduct any business. Since it is impossible to conduct any business with Haiti now, it makes it impossible to create revenue outside of the country. This is having a huge impact on Haiti's economy. this information along with more can be found at:


http://www.bukisa.com/articles/229232_the-impact-on-haitis-earthquake-on-the-worlds-economy

How natural disasters effect business

natural disasters tend to affect insurance companies as well as local businesses affected by the disaster. The impact on other businesses can vary. For example, disruption in the oil drilling and refining activities in the Gulf of Mexico during the 2005 hurricane season caused some companies to lose revenue due to the loss of productive capacity, but also caused the price of oil to increase thus benefiting others in the industry. Landstar System, which has a contract to provide trucking services to the U.S. Government in the aftermath of natural disasters, was also a beneficiary.

Some studies have suggested that commodities provide an effective hedge against natural disasters because disasters such as floods, drought and hurricanes can affect commodity supply and increase the price. However, the effect can differ across countries example could be a drought could cause a shortage of corn and increase corn prices. The higher corn prices raises feed prices, which could cause ranchers to slaughter cattle earlier than usual and depress the price of that commodity in the short term.

Natural disasters create need for NFP's

Natural Disaster's, such as the earthquake in Haiti, create a need for non profit organizations and their spending of donations stimulates the economy. Within hours of the quake, the canadian government and agencies began what has been a significant humanitarian response to Haiti by providing aid in the following areas:

$5 million for urgent humanitarian needs.
$60 million to the UN appeal to fund essential necessities and basic services provided on the ground by UN agencies.
$11.5 million to support critical relief efforts by Canadian NGOs.
$8.5 million to the International Federation of the Red Cross and Red Crescent Societies' (IFRC) appeal for the provision of humanitarian assistance. The IFRC is helping to meet emergency needs of some 300,000 affected people.
The Haiti Earthquake Relief Fund – Between January 12 and February 12, 2010, the Government of Canada will match eligible charitable donations made by individual Canadians to support relief in Haiti. As of February 12, more than $128 million had been raised to date through the Haiti Earthquake Relief Fund.

All of this funding is paid to other agencies within the economy for their supplies or services related to the relief effort. For more information on how the government uses NFP's to help relieve Haiti please check the following link: