Holiday travel seen slower after Katrina

Higher gas prices may have also slowed sales in shopping malls this Labor Day weekend.

Michael Solomon, who owns and operates Great American Cookie stores in malls in Kentucky, Nevada, Indiana and West Virginia, said his weekend sales were “well below expectations.”

“It started Friday when all the gas prices jumped up,” said Solomon. Store managers in West Virginia and Kentucky also told him local gas stations were out of gas, which he assumes caused some consumers to stay at home rather than venture to malls.

“It was slower than usual. People spent the same amount of money. It just felt like there were less people,” said Solomon, who fears that he may have to raise his prices if high energy costs boost what he pays for freight and other services.

Much of the rise in gas prices stems from major disruption in how oil and gas are produced and delivered in the U.S. Gulf coast states.

These facilities were responsible for producing 1.4 million barrels of oil each day, equal to what is imported from Saudi Arabia each day, and 80 percent of that, or some 1.2 million barrels, was halted because of Hurricane Katrina, according to John Felmy, chief economist at the American Petroleum Institute.

At one point, nearly 95 percent of the production from these Gulf Coast facilities was disrupted last week.

The magnitude of the damage to the Gulf Coast facilities and the time it takes to repair them may have an impact on the overall U.S. economy, warned Chris Low, chief economist at FTN Financial.

Low recalled that two years ago, energy related costs like gas at the pump or heating oil for homes made up about 4 percent of household budget. That had risen to 5.5 percent prior to Hurricane Katrina and is likely to rise further, he said.

“I would think that certainly some of the discretionary spending would drop. There will be those who think twice about driving at all,” said Low.

MORE FROM AUTOS

Autos Section Front

New small cars might struggle in market CEO: GM to repay $6.7 billion in U.S. loans Chrysler won’t repay $3.7 billion TARP loan China's influence on automakers is growing GM in talks to sell Saab brand, old technology The best and worst used cars you can buy Review: Audi R8, precision meets flair Motor Trend names Ram truck of the year GM, Chrysler used bailout funds for daily costs GM continues shake up of top management Autos Section Front   Add Autos headlines to your news reader: