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From StratFor:

Hurricane Katrina: Crunch Time

Hurricane Katrina continues to rage over southern Louisiana. The storm already has left the primary oil and natural gas production regions and is assaulting the mainland itself.

First, the good news. An 11th hour burst of relatively dry air succeeded in taking (a touch of) the wind out of Katrina's sails. In technical terms, this means the storm has been downgraded to a Category 3 hurricane; however, as of 10 a.m. local time, 100 mile-per-hour winds are still hitting New Orleans.

Another small bit of good information is that the storm did shift course to the east in the early hours of Aug. 29 and is traveling due north. Though parts of New Orleans will still be in the "eyewall" -- the most dangerous part of the storm -- the city itself seems posed to just barely avoid a direct hit. As of 9:30 a.m. local time, Katrina's eye was even with New Orleans on an east-west axis

Very soon, the focus will shift from stunned awe at Mother Nature's raw power to the dreary and painstaking work of damage assessment and repair. The storm passed directly over the Mississippi River's mouth, raising the prospect that the main channel has shifted. Such a development would delay the reopening of the river until the channel could be resurveyed and likely dredged. Depending on the silting, that could take a few hours -- or a few weeks. Add in damage to critical energy infrastructure and initial damage estimates, before a single assessor has put foot on soggy Louisianan ground, are at a floor of $30 billion.

It is difficult to predict the damage -- and impossible to underestimate the significance -- of what the United States faces. The city of New Orleans, the Port of South Louisiana and Port Fourchon combined serve as the hub of trade and energy collection and distribution for the middle third of the country. All have been hit -- and hit badly. But, for a few hours, we will not know specifically how badly.

Which means that we are now in the realm of logistics, and if what few scattered reports out of New Orleans are correct, there will be few people available to do the work necessary to repair the damage.

The northwest quadrant of the hurricane is currently whipping waves south and southwest across Lake Pontchartrain. With storm surges expected to hit as high as 20 feet -- before the waves are taken into account -- the expectations are that water is already gushing across the northern levees protecting New Orleans from the Mississippi. Needless to say, no one is standing on said levees reporting live. The world will have to wait a couple of hours until winds drop back into the double digits before a few brave souls can venture out and assess how bad a shape the city is in -- particularly whether the levees held at all.

That remains the question. In addition to the humanitarian disaster -- there are scattered reports that several evacuation centers have sustained heavy damage -- there is at least one report of a barge breaking free of its moorings. Should it strike the levee in the current conditions, the rupture would put the viability of the city in doubt. At present, there is at least one report that one levee has been breached already, although it is not clear if the barge caused the breach.

Assuming that all were well in the world and that the New Orleans pump system were safe above water (it is not), operating at full capacity the city could drain itself in three weeks. A more likely figure is six months. If New Orleans is out of the equation, then repair efforts will need to be based from further inland at a slow pace and higher cost. The next few days will be a race against time to get everything in working order again. What is not clear at this point is whether there will even be a city from which to base the effort.

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