Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices.Three years later, once the refining capacity was restored, these prices came back down.The restoration of refining capacity should

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The restoration of refining capacity will increase the production capacity of oil and natural gas which will result in a decrease in price. This will shift the short-run aggregate supply curve to the right as there will be an increase in the overall supply of goods and services in the economy. This will bring the prices back down to the pre-Katrina levels.

Hurricane Katrina Destroyed Oil and Natural Gas Refining Capacity in the Gulf