A weakened storm Ike barreled northward on Sunday after slamming into the Texas coast as a hurricane, flooding seaside towns, cutting power to millions and paralyzing the oil hub of Houston.

The giant storm left extensive devastation in its wake and officials had barely begun to assess the damage, which early estimates put in the billions of dollars.

Ike, which idled a quarter of US crude oil production and refining capacity, swamped the island city of Galveston and hammered Houston, the fourth-largest US city.

It shattered the windows of skyscrapers, showering streets with glass and debris, tore apart bus shelters and ripped metal sheets off buildings.

"This hurricane has caused devastation across areas of Texas and Louisiana," said David Paulison, administrator for the Federal Emergency Management Agency.

According to an early computer-model estimate of damage by the insurance industry, Ike could lead to $8 billion to $18 billion in claims.

About two million people evacuated before Ike made landfall early Saturday and officials urged residents to stay away for now.

"We don't want people to come back permanently," said David Smith, mayor of Friendswood in Galveston County, Texas. "Resources are stretched. There's no power now."    

The storm had weakened to a tropical depression by early Sunday as it churned across western Arkansas, heading north on a path expected to bring heavy rains over a broad area stretching to Canada.

In Houston where cheap gasoline has made the car king, long lines formed at service stations as tanks were tapped. The Houston metropolitan area has some 5.6 million residents and a booming economy thanks to demand for energy.

Homeland Security Secretary Michael Chertoff said at least 940 people had been rescued so far, but he had no confirmation of any storm-related deaths.

"We obviously are concerned," Chertoff said in Austin, the state capital. "There may be people we find who didn't get out and be in the rubble." Chertoff planned to tour the storm-battered region on Sunday.

In Galveston, where the storm came ashore, boats were tossed out of the water and thrown onto the main highway with other wreckage, making it impassable.

But the vital Houston Ship Channel was not hit as hard as expected by a storm surge that could have caused far greater damage and swamped refineries.

"Fortunately the worst-case scenario that was spoken about, that was projected in some areas, did not occur," said Texas Gov. Rick Perry.

He noted, however, "very heavy damage" to the power grid. About 4.5 million people could face weeks of power outages. In Beaumont, Texas, authorities said damage was so extensive that it could be more than a month before power is restored and residents choosing to stay in the area must be prepared to be self-sufficient for weeks.

The storm hit Galveston as a Category 2 hurricane, flooding the island city with sea water some 8 feet to 10 feet (2.5 to 3 metres) deep in some areas and causing extensive damage. The first aerial pictures showed homes surrounded by water.

More than half the city's 60,000 residents fled before the storm, but Galveston City Manager Steve LeBlanc said 17 buildings had collapsed and a causeway linking the island to the mainland had buckled.

In Bridge City, a small community along the upper Texas coast, frantic calls for rescue overwhelmed emergency workers. "We just received one call from a guy in his attic and the water is rising and he can't get out," said Orange County spokeswoman Jill Frillou.

"There were a lot of people that did not leave and just did not expect water to come that high."    

Ike triggered the biggest disruption to US energy supplies in at least three years and sent gasoline prices higher at the pumps. Oil traders will have a chance to react during an e