This is only a breathing space, will it be used?

UPDATED to clarify the supply type - sorry, Dave. There is additional information on the oil that will come from Europe and other sources.  The loss in production, and from the oil imported through the LOOP is more than 2 mbd, and while the LOOP  (Louisiana Offshore Oil Port) is operational, the situation down near where Katrina first came ashore is not that good.  The Washington Post has described some of the problems.  These are just the issues that affect the landward side of getting the oil ashore and back into the national pipelines.

The time that it will take to restore the overall production from the Gulf (as has been discussed earlier) is going to take many months.  Rigs have moved, well casings are deformed. Platforms are adrift or moved.  I mention these again since while the numbers reported on the very generous contributions from Europe sound large, at between 1 & 2 mbd replacement need, the 60 mbd of replaced production will only last between one and two months.

Twenty-six countries in an international energy consortium will release more than 60 million barrels of crude oil and gasoline to relieve the energy crunch caused by Hurricane Katrina in the United States.

As part of that effort, the Bush administration will release 30 million barrels of crude oil from U.S. reserves.

UPDATE: The OGJ story is more specific
On Sept. 2, the Paris-based International Energy Agency (IEA) and the European Union Commission unanimously approved a measure to release 2 million b/d of oil from strategic storage for 30 days.
"IEA, which coordinates petroleum stockpiles across the Organization for Economic Cooperation and Development, is in consultations with its European members about the US request [for gasoline]. The German and Spanish governments have already expressed support for the request," Raymond James reported. The US Strategic Petroleum Reserve (SPR) contains only crude oil. But Europe has 50 million bbl of emergency gasoline in storage. The US uses 10 million b/d of gasoline, and US gasoline production is down by 1 million b/d from normal levels because Hurricane Katrina made inoperable nine major refineries on the Gulf Coast.
That story is also optimistic on the timetable to restore production through the refineries, and from the LOOP.
Tommy Martinez, executive director of the Louisiana Offshore Oil Port, said unloading of tankers at that facility could begin Sept. 2. LOOP shut down operations Aug. 27 ahead of the storm but has since resumed deliveries from storage to ExxonMobil's Baton Rouge refinery. A pipeline controlled by the port connects with the Capline pipeline system in St. James, La.
Beyond that time, the onset of winter in Europe will make it more difficult to provide, from a supply that may be questionable for Europe itself (given the state of North Sea depletion)   any more to help us out.

But the depths of the problems are such, and so many, that it is unrealistic to expect that this will be enough.  Consider the time that it is going to take to fix the levees, for example. As the Houston Chronicle noted

The temporary wall near where the canal meets Lake Pontchartrain will keep waters at the breach location stable, allowing Corps engineers to fix the levee. The Corps is not certain how long that will take.
"I don't think it will be super quick," said Susan Jackson, an agency spokeswoman.
After the 17th Street Canal breach is fixed, as well as three other less challenging breaches in New Orleans' levee system, the city's pumps can begin to push water into the lake.
At its highest efficiency, the pumping system can remove one foot of water per day. By Friday, when the city and lake drain naturally to 1 foot above sea level, the lowest areas of New Orleans will remain choked under 11 feet of water. That's a minimum of three weeks' pumping.
But it could take as long as a few months to fully drain New Orleans, Jackson cautioned. That's because the breaches must first be repaired, and the pumps restored.
Engineers will assess the condition of the city's dozens of pumps in the coming days. If they were turned off before they flooded they could be restored in a few days, longer if not.
"I have to believe it's going to take awhile to get them back up and running," said Chuck Morris, an associate professor of civil engineering at the University of Missouri-Rolla who has, in the past, consulted with New Orleans on its pumping system.
The Corps must also fly in auxiliary power units to operate the pumps, which normally run off the city's electrical grid. This grid may not be restored for a month, or perhaps longer.

And the power is also needed to restart the refineries and the oil pumping stations that must be brought up to speed to move the oil that will be needed for this winter.   And that does not address some of the other issues with bringing back production from the Gulf.  Consider this picture of the current condition of the port from which the boats set out to tend the rigs and platforms.  The whole area is flooded, reminiscent of the land after the tsunami, and suggesting that the overall level may have sunk, making it more difficult to re-establish the port infrastructure.

A photo of the port at Venice.
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I have my own ideas, of course, but why would Europe do this?
and...isn't that oil from Europe going to have to be replaced at some point?  at what cost?  meaning there will be a demand spike at some point...right?
Yeah, right. I can't make sense of it. US demand last week spiked to 21 mbd (peak driving). We're going to be down long term (years) after some short-term GOMEX recovery about 0.6 to 1.0 mbd -- my rough estimate. Even a little conservation in the US could easily cover that "shortfall" all others things being equal. Why would the EU jeopardize their own bulwark against supply problems?
this says to me that things are worse than even we are hearing.
A little less breathing space from Iran:

Iran Oil Ministry Evaluates
Crude-Oil Flow After Blasts

By SALLY JONES
DOW JONES NEWSWIRES
September 3, 2005 10:30 a.m.

Iranian oil-ministry officials on Saturday were assessing how much crude-oil flow had been affected after five of the country's oil wells were shut down following blasts early Thursday.

"Things are still being assessed. It is not exactly clear as to how much oil has been affected or for how long," one Iranian oil official said.

Other people familiar with the situation estimate anywhere between 50,000 to 60,000 barrels a day of crude oil has been shut-in following the explosions in the southwestern province of Khuzestan, one of the country's major oil hubs. Iran is second largest producer in the Organization of Petroleum Exporting Countries with crude output of around 4.2 million barrels a day.

Earlier Saturday, an official at the Khuzestan province governor's office told Dow Jones Newswires that the explosions were "terrorist operations" against Iranian oil interests. Gholam-Reza Shariati, deputy governor-general in charge of security affairs, said a number of people have been taken into custody in relation to the explosions.

According to reports, three handmade bombs exploded before dawn Thursday, leading to the shutdown of crude oil from five wells around Ahwaz, the capital of Khuzestan. Reports also suggest the blasts are linked to Arabic ethnic unrest in Khuzestan in June, in which eight people were killed and 36 injured in Ahwaz by explosions that targeted government buildings and officials.

http://online.wsj.com/article/0,,SB112575537576331007,00.html?mod=home%5Fwhats%5Fnews%5Fus

The IEA is a 73 oil shock inspired creation. It exists to co-ordinate withdrawals of emergency stocks. So this is a rusty but apparently functional piece of the world's energy security machinery shifting into gear (and doing some good it seems).
As I have stated numerous times this week the powers that be have not recognized the damage yet.

They are just starting to see what a problem NO actually is and that has TV cameras everwhere showing them.

The oil infrastructure that the administration keeps saying will be back up quickly is in worse shape than the city.  The city is only flooded.  The oil infrastructure is mostly GONE.

This is why we need a national policy to conserve and ration now.  Country wide.  As long as it takes until we know for sure what the damage is and when the gulf will be back close to capacity of last week if it ever is.  The failure we are see in response to rescues is a harbinger of what is to come on energy.

Wait a week, the response will come.  But again it will be too little too late and we will have a bigger mess than we should of.

Re: "The oil infrastructure is mostly GONE..."

Yeah, a lot of it is. There will be modest short-term (next 6 months) recovery and we'll get ~0.5 mbd back online from GOMEX. Leaving a shortfall of about 0.6 to 0.8 mbd -- this will be a long-term deficit.

"Wait a week, the response will come...." -- What will that be? Of course, I agree with you, The Emperor Has No Clothes.
My understanding is that the world is/was using right at 84 mbd.  Katrina just knocked out 1.3 mbd.  Hopefully this can be brought back to a deficit of only 0.5 mbd as you state.

I don't see where the spare supply is going to come from.  Especially refining capacity and distribution.

So the short term is deficit spending of oil.  Out of the worlds storage capacity.

This is not a logical response to short supply.  It works with money but not real goods.  It can only continue until the stored supply is exhausted and then you must cut consumption anyway.

My prediction is the world will take a week to determine that the oil released from storage can't be replaced and will continue to go down.  At that point major policy decisions will be aired.

I won't forecast what they will be.  To many options for my feeble brain tonight.

Motor gasoline accounts for about 45% of US petroleum consumption, and distillate fuel oil is about another 19%; the total is about 13 mmbbl/day.  If we can cut our needs by 10% by e.g. driving better, that will save 1.3 million barrels per day.  That's the entire immediate shortage.

I've already noticed people slowing down on freeways.  This is happening without any concerted effort, which is a good thing.

As of yesterday (it came well after markets closed) the EIA special status report on GOM:

http://tonto.eia.doe.gov/oog/special/eia1_katrina.html

  • There are reports that Hurricane Katrina may have damaged four natural gas processing facilities on the Gulf Coast with a combined capacity of 5.5 Bcf per day, which is the equivalent of almost 10 percent of total national production.
  • Follow-up reports have not indicated expected outages of more than a few weeks, with many units expected on line within a few days. A full assessment of some facilities, however, will require onsite inspections.

Still no refinement of this statement in terms of outage expectations for the processing facilities.
Given that spot shortages are already springing up around the country, and folks are starting to stock up and go into a bit of a panic mode, this step, if publicized is aimed to both a) get those folk on the East Coast some gas b) calm the fears of most of us that gas is going to get very expensive, since there won't be enough of it.    If the refineries can be brought on line in a month, then the problem then becomes one of supply.  And here, perhaps, we might learn just exactly how fungible oil really is, since (as a relevant example) I believe China just banned oil exports.  Since the term is limited this will only give time for a longer-term solution to be find.  But that does not make me less relieved that this interim solution has been put in place.
HO, refinery capacity was at about 93% the week before Katrina struck. That was down from previous weeks as refineries ran into maintenance bottlenecks created by running at "full" capacity for weeks and weeks. As you are obviously aware, we have no hope of meeting even that number (93%) for at least a month from now, and likely, some weeks longer.

How are additional supplies from the EU going to help? I really don't understand what you're saying or why they're supplying us with this oil we can't use right now. The capacity to refine the stuff just isn't there and won't be there.

And "calm the fears"? I think it's too late for that even on this Labor Day Weekend with spot prices > $6.00/gallon (as in Chicago).
My understanding is what's mostly coming in ships from Europe is gasoline, not crude. Presumably the release of oil from their strategic reserves will primarily be to refineries in Europe. This has pushed up gas prices there too.

In effect, trade is spreading the problem out across the whole globe (and thereby reducing it's effects on us).

If that's the case, I stand corrected. Direct gasoline shipments are one thing, crude oil shipments are quite another. This was not clear from HO's text.

Still, it's a short-term "stop-gap" measure, isn't it? I still don't understand why Europe would do this, alleviate our pain this way, even temporarily. (I read your previous post)
Well, according to the link up there, it's a treaty obligation.
The International Energy Program (IEP)which is contained in the IEA's governing treaty Under the IEP Agreement, participating countries' commitments include those:
  • to maintain emergency oil reserves equivalent to at least 90 days of net oil imports;
  • to provide programmes of demand restraint measures to reduce national oil consumption;
  • to participate in oil allocation among IEA countries in the event of a severe supply disruption.
and
Rapid response measures and framework for decision making
  • The IEA also has an additional set of co¬≠ordinated stockdraw and other response measures commonly known as Co¬≠ordinated Emergency Response Measures (CERM). This was established by a July 1984 IEA Governing Board Decision and updated more recently.
  • In making the Decision, the Governing Board recognised the importance of responding rapidly to a supply disruption in order to minimise the potential economic damage.
  • CERM may apply even if the oil supply disruption is not large enough to activate the IEP emergency measures.
Also, putting on my EU citizen hat for a moment (I have dual citizenship but live in the US), Europeans are mostly quite decent people and feeling a lot of compassion for the US situation right now, despite their incredibly low opinion of the Bush administration.
RE: "I still don't understand why Europe would do this, alleviate our pain this way, even temporarily."

Could it be that the Apocalyticons are really close to the truth? We are the only super-crazed consumers on this planet. Maybe, they have quietly been told that if those consumers run out of gas, for even a few days, it's game over.

The gasoline will be worth more on the west side of the Atlantic than the east.  They're going to make a profit on the deal, and shove their own populations toward helping them meet their Kyoto targets (among other things).  Plus, helping the US right now keeps their exports flowing, such as they are.

It's all enlightened (and sometimes just plain direct) self-interest.

I think the European reaction is a combination of compassion and self
interest to prevent a massive US recession that will spill over into Europe
and elsewhere. You may apply your own degree of cynicism as to how much
of each there is.
Since, as well as concrete factors, there are confidence factors in
preventing a recession such as whether the housing price bubble bursts,
the psychcological effect of preventing a sudden rise in gasolene prices
and substituting a gradual rise towards the prices we have long been
paying may help.
We meanwhile will have to get used to even higher prices, when your
prices hit $5 gallon ours will be equivalent to about $10
However has anyone noticed the glaring thing missing from this offer.  NO-ONE has offered to increase production to make up the shortfall.
Not that I believe they can, but I thought I read that the Saudis "promised" to increase production.
What about re-instituting the 55mph speed limit. It appears the overall shortfall in supply is approximately 10%, how much of that could be made up with a 55mph speed limit. Does anyone have access to authoritative numbers in regards to this.
I am a newbie here and really have come to value this site. Here are my general thoughts on Katrina and Oil.  Ive been a peak oil researcher for quite a while now and the only ultimate answer to the bigger picture problem is a)reduction in consumption b)increased % of energy from renewables and c)smooth transition to a)and b).

In my opinion, the best way to accomplish a,b,&c above is get oil prices as high as possible as soon as possible, leaving more in the ground for things we REALLY need. (like creating infrastructure around energy alternatives).Despite the human tragedy unfolding, this weeks events are a shot across the bow of our our energy problem. For the first time in a lot of peoples experience, a small part of their awareness 'gets' that oil is finite. This is an important first step and we are fortunate to receive this flag while we are still before or close to Peak production.

I think things will get worse for a week or two, then gradually things get back to normal on the supply side.  On the demand side however, methinks the levee has been broken - I think we will have demand destruction in Q4 that will much more than offset the possible smaller production numbers - the natural gas and heating bills for this winter will definitely preclude buying Johnny a GI Joe with Kung Fu grip for Christmas. Oil will go down precipitously in price due to supply>demand. But that will spark the first economic boom that will occur at/post Peak after which the price will never go down again.

Thus, the timing of this event is very important -it will change peoples habits slightly, cause them to do a little research into Peak Oil, reign in spending, conserve a bit, carpool a bit, make do with less, etc.  It will be an important window for environmental and academic organizations to get the facts right on our total energy portfolio, how much we have, of what quality is it, how bad is each piece for the environment, how much energy A does it cost to create energy B, etc.

What Katrina has done, is cried wolf before the REAL big bad wolf is at our door. This is just a pup.  I hope we collectively use it as a case study for the real deal

Just in case its not immediately clear (it wasn't to me until I re-read the attached quoted bits and also a note on the EIA site), the 2M bbl/day release of strategic reserves the IEA is requesting always includes amounts released from the US SPR. 1/2  in other words.

30M bbl from the SPR in my head is about 4% of the reserve. 4% per month...

Once they get things rolling again... whenever that is... you can bet they'll be refilling the SPR and perhaps topping it up to 1M bbl won't be seen as something to do on a rainy day now. Clearly there are some types of emergencies which the SPR is well suited to helping with.

However its become woefully clear that refineries world wide and lack of long term storage of refined products are the lynch pin in our petro dependency.

Hopefully no group will intentionally take advantage of that weakness.

Did anyone else notice the strangeness of the headline today that we are transferring 300 troops from Afghanistan and Iraq to Louisiana?  Are things that tight that we cant move local troops over there -they have to come from an active military arena? Boy if I were a terrorist or a Chinese I'd be licking my chops...Unfortunately, Im just a graduate student at an american university....
According to CNN, those troops are coming home because they or their families were impacted by Katrina.  It's not a redeployment so much as it is an act of compassion.

http://www.cnn.com/2005/US/09/03/katrina.airmen/index.html

ahh. Thanks Lou - that makes a bit more sense.
Has anybody seen the flood of calls for more refineries as the ANSWER to our high energy prices.. I was just watching FOX news about the future of energy costs and about 3 out of 4 pundits stated more refineries will bring down the cost of gas but not for many years.. I have stated before that more refineries will not bring down the cost of gasoline no matter how many they built..

What's your thoughts??

It is only in the US that there has been no initiative to build new refineries.  You will find them in the pipeline in places such as Saudi Arabia and China. Some have already come on stream this year, around the world, while others are being built.
Earlier, I mentioned the fact of our already importing 10% of our mogas. This link goes to a fine EIA chart showing imported refined produts, http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/curren t/pdf/table09.pdf

These levels of imports have been going on for at least a decade now; so, it would seem that the oil majors deem it cheaper to import than build new refineries, a point long raked over the peak oil coals but apparantly forgotten. Of course, if Americans drove vehicles that averaged 15% better mileage, then we wouldn't be importing 10% of our gasoline and our refineries wouldn't need to run fullout very often. So, the refinery bottleneck causes prices to rise; people buy cars that use less gas; demand drops, which removes the refinery bottleneck; so, if you're an oil major, why invest many millions to build a refinery that will never run at full capacity and possibly be unprofitable? Substitute for the 15% better mileage the decline of crude for feedstocks, and another explanation for the lack of refinery construction is provided. If overall supply and demand were actually going to increase on the scale envisioned by the EIA, then we would certainly see the construction of many refineries; instead, we only see a few worldwide. That behavior holds a very important unspoken message: There's not enough oil to increase the supply that justifies the expense of building new refineries.  

I think that as long as oil and gasoline prices rose together the refinery argument was spurious.  That's semi-confirmed to me because the disaster has shut down refineries and broken apart the oil/gas prices.  Oil is down a bit, as gasoline continues higher.  In general.  Vague signal.

On the disaster itself, each day I think I've finnaly understood what a human tragedy it is, but so far each day gets worse.

What actually happens here? When this gasoline is "released" from the strategic reserve, is it released onto the open market? I mean, can China decide to put in a bid for it if it wants?

If not, how is the price set? Are the Europeans subsidizing the US with cheap oil?

From the reports in the press I believe that the individual companies request that they be "loaned" a certain amount of oil for a given refinery.  This is then supplied, and exactly what the arrangements are I do not know, though it may be that they are expected to then pay it back in some reasonable and defined period.  With that degree of specificity I would doubt that it would go to anyone outside of the affected area (though in this case this might include the whole country).
This is how the SPR has been working, but the Secretary of Energy announced last night that he was going to waive the general rules and sell some oil to the highest bidder.  I suppose this is done for two reasons; to generally increase the supply of oil and reduce the price and to get oil that may not processable at local refineries to a more distant location that may need it.  I don't think the oil would be allowed to leave the country.

On a similar subject on IEA supplies, I expect they will be sold to the US at market value and repurchased within Eurpoe.  That is just my expectation and someone please advise if this is not how it will work.

As far as speed's effect on fuel economy, here's one reference:
http://www.eere.energy.gov/vehiclesandfuels/facts/favorites/fcvt_fotw222.shtml

Here's one contrasting diesel versus gas engine fuel consumption change (about halfway fown the page). Note the discussion of gear ratios though. I know the truck I drive is geared for the best fuel economy possible @ 63 MPH. 55 is at an awkward point in the powerband (overrevving in 9th or lugging in 10th).

http://www.62-65-dieselpage.com/mileage.htm

The "GM Product Service Training Manual for the 6.2L Diesel Engine" (#16015.05-1D) has this to say about GM diesel fuel mileage:

      "The diesel, like any engine, is affected by driving habits. Speed is more critical on a diesel than a gas engine. On the highway, in the 50-75 mph range, the fuel economy will go down about 3 mpg for each 10 mph increase in speed. A gasoline engine will lose about 1-1/2 mpg for each 10 mph increase in speed. This condition is perhaps the most significant factor in obtaining good fuel ecomomy. Fuel economy may vary as much as 5 mpg in a given vehicle with different drivers."

And here is one specific to heavy trucks:

http://www.heavydutytrucking.com/2004/10/067a0410.asp

You can take advantage of the speed control in many of today's electronically controlled engines. Fleet analysis shows that reducing road speed to 60 mph from 65 can lower fuel use by about 8%. A rule of thumb established by TMC is 1 mph equals 0.1 mpg. So a 5-mph reduction in average road speed would yield a 0.5 mpg improvement in fuel economy.

Given that we can't refine the crude from the SPR the deal with Europe must be they send the refined products here and take back crude to refine there to refill their SPR.
The neocons who rule this country apparently believe that what has never happened won't happen such as a levy break in new orleans or the advent of peak oil or airliners rammed into skyscrapers.