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The impact seems widespread, but there is hope
Posted by Heading Out on September 2, 2005 - 8:33am
The Washington Post has two stories that give some indication of both the problem, and a short term solution that seems to be developing. Firstly in regard to pipelines and costs:
Two major pipelines disrupted by Hurricane Katrina that provide much of the Washington area's gasoline showed signs of life yesterday, although it could be days before they are running up to full capacity. Colonial Pipeline Co. said that it was operating at 40 percent of capacity and that it hoped to operate at 61 percent by today and 86 percent by the middle of next week. Officials with the other pipeline, Plantation Pipe Line Co., said the line is operating at 25 percent. . . . . But oil analysts and company officials said they expected an increase in imports of gasoline from Europe within two weeks. That could help to bring down prices and ease supply disruptions, they said.But given that motorists are willing to pay more, since they must have the gas to be mobile, this altruism will be rare.......Harry Chang put up the "Sold Out" signs at his Chesterbrook Excel station on Old Dominion Drive in McLean, but not because of a break in the supply chain from the hurricane. Chang, an independent dealer, ran out of gas Tuesday morning. He said that he could still buy gas to sell but that he didn't want to buy it at the post-Katrina prices. He said the lowest distributor price he knew about was $2.97, and when he added on federal and state taxes plus credit card fees and a 3-cent profit, he estimated that he would have to charge $3.47 a gallon.
The supply pipelines will begin flowing to a limited extent as the second story points out, but since the supplies into it are limited, the better news is that some oil will be sent from European stocks, to limit the shortage.
A decision was expected to be announced by the Paris-based International Energy Agency later Friday about the coordinated release of crude and refined products by agency members, said an administration source speaking on condition of anonymity because of the discussions on procedures for the release were still under way.
The release would total 2 million barrels a day, with the U.S. contributing 44 percent of that amount in crude from the Strategic Petroleum Reserve. Administration officials hope the other 56 percent would be in the form of gasoline now in European government stockpiles.
Speaking on Britain's Sky News network, EU security affairs chief Javier Solana said the U.S. administration has approached several EU member states individually for help. "Whatever they ask for, it will be given from the reserves of oil that the different (EU) countries are providing," he said.. The European supplies will, however, likely take around two weeks to be arranged, and then be delivered, since tankers must first be hired, and they, in turn have to make it to the European sources, and then make the trip itself, before the fuel can be used.The increased gasoline imports would ease the growing concern about gasoline supplies that have caused gas stations in some areas to shut down and others to close early.
UPDATE: MSNBC reports that the European shipments are well underway
Shipping brokers said 10 cargoes were booked on Tuesday with the remainder on Wednesday and Thursday. Brokers were not immediately able to say how much volume has been booked to load, but they said the flotilla was a mix of 37,000-, 60,000- and smaller 30,000-tonne loads. Normally Europe ships one or two cargoes to the United States per day. "There's an enormous amount that's been fixed," one senior ship broker said, adding that freight rates were soaring as ships were in shorter and shorter supply.Technorati Tags: peak oil, oil, Katrina, Hurricane Katrina, gas prices
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(I alwasy picture fat, sweating, cigar smoking, guys in Detroit refusing to change at times like this.)
This can only have one of two effects:
- Transfer the markups from the sellers to the distributors and refiners. (Makes one wonder who supported her election...)
- Keep prices below the point where supply suffices for demand, causing shortages.
This is one of the reasons I despise populists. It's time for all of them to be given a crash course in economics, and as many dope-slaps as are required to make them pay attention.I consider this is a litmus test for how Western civilization will deal with energy reductions in the coming years. And it does not bode well for the future. When push comes to shove, we'll burn dirty gasoline, do anything to keep the machines running, and to hell with the consequences. (Ah, we'll deal with that next year).
Shows how much weight the issues of environmental protection carry.
My response is that I think we have hit the good news in its relative weight to the bad throughout this situation. There's been a lot of bad news.
While there are little pieces of hope that matter greatly, such as the one that HO just summarized (which says pretty much the same thing you have here in the comments, had you read under the fold) in his piece that you just commented on, there's also a lot of negative information that needs to be digested.
So, you can attempt to impugn all you wish. We don't do this blog out of ego, we do it because we believe that the issues we cover here are important. In that cause, I believe our treatment is representative and justifiable.
can this site do instant polls?
Look for polls and a lot more other features to be rolled out in the coming weeks!
This site is excellent because most posts have data that backs up a statement. We all (myself most of all) go off with predictions of our own beliefs about the future from time to time. But the weight of data is what is steering our knowledge ship.
I think it is okay to make predictions and see how accurate they are over time. I don't think people being polled about one particular idea at this site is very useful about future outcomes.
Thanks,
'CM'
I wasn't impugning you and I think you are perhaps a just a wee bit over-sensitive. Generally speaking my view is that your posts have taken a darker view that just doesn't seem to be reflected in the pricing of gasoline. Maybe the markets are whacked and you guys are onto something, but it does seem most of the focus here is more negative than perhaps warrants.
As for the gasoline markets, I truly hope you're right. But no, I do not share the market's optimism. Only time will tell, I guess.
The pipelines are going, at best, to be slow for a while. The LOOP and Fourchon are, at best, at very limited capacity for a while. The refineries are, in some cases, months away from capacity operation. (and we have, in one way or another, at least comment boxed those events, by the way.) The removal of environmentally-safe/EPA gas requirements are a positive short-term development for supply, but they're not good for the air we breathe. Trade-offs, I guess, eh?
Still, please understand that we don't have some kind of "dark" wish that prices are going to go to $10/gal. That's just not the case. I just think we here at TOD come from the position that the perspective of the US is going to have to adjust to come to grips with how bad Katrina is going to hurt, especially with oil supply/demand as balanced on a knife's edge as they were prior to this event.
Yes, and you missed several of the items. My characterization was correct, you missed them. Further, you guys have been on top of this story like nobody else (which is a good thing) so it struck me as a bit odd that you guys are missing some of these stories.
I'm not saying that, and if I were to take your view on this I'd say you are imputing to me views I do not hold. What I noted was that your view is darker than most. That is, it is possible to want things to work out, but have a more pessimistic view than others. Considering that you wrote,
My take on your position is not all that off. You are not as optimistic as the market...hence more pessimistic, or as I put it a somewhat darker view.
By the way, I'd also suggest that watching the electricity front is a good idea too. From what I've read that appears to be one of the early hurdles many seem to face. Until that one is handled it seems the others are less important. And this is where the natural gas production could come into play. I don't know if LA has lots of coal plants, and I do know Entergy has quite a bit of nuke generation, but is that running or not? My understanding is that bringing a nuke plant back on line is a fairly lone and lengthy process.
Fernando,
Whatever. This kind of comment is just stupid and indicative of trolling, IMO. I haven't said everything is going to be just peachy. In fact, initially I was just as grim in my outlook as the Oil Drum. If you wish to continue posting out of ignorance, feel free, but it only reflects badly on you.
Oh and my views on peak oil in general parallel those of Prof. Hamilton. I guess he's just another rossy viewed econ guy too.
I posted in the comments on Sept 1 about both the Plantation and Colonial pipelines trying to restart (with links to their press releases) as well as the limited resumption of LOOP (they started to unload their first ship since pre-Katrina at 5:00 PM on the 1st and still reported generator problems)
That these items did not immediately become regular posts on The Oil Drum I attribute to the fact that the guys running the site have full time jobs, not that they were trying to not highlight the good news.
We're all looking for good news this week, it seems. I don't believe any malice was intended.
You came here, droped an opinion in the line of "I don't like the pale blue color of your site" and when someone tried to highlight that you are just giving an opinion based on your personal taste by paraphrasing you, you said "you're trolling and making stupid comments".
Well you've just described your comments.
His views? could be, but not his manners, my friend. He does his stuff with style.
Fernando
The "having a different perspective" part is and always been true of TOD...and I hope it continues, because in my view, it's a very valid perspective. Therefore, I take it as a compliment.
Also, Ben's right, we have full time jobs AND maintain this site...so we're gonna miss things.
That's why we count on the amazing community here. You help us more than you ever know. Our commenters are simply amazing resources and they help us SO MUCH...so, I want to take a minute a say "thanks" to all of you.
You let us know we're doing something right, and your help just makes the site better.
In my view you reflect the classic rossy views that extreme freemarketeers use all the time.
There will be varying degrees of being "wrong" in a situation like this.
Ascribing too much importance to a single day pull back following a price spike would be almost as unwise as putting too much weight on the importance of the spike itself.
Or looked at another way, if we isolate just prices from the past week, there isn't enough data yet available to determine if a new trend higher has kicked off, or if recent prices marked a definable top that we can look back at longingly from within the cockpit of our Ford Excursions.
On news such as this week's, price always surges and almost always pulls back some as traders take some profits or conclude, for themselves, if perhaps things aren't as bad as they looked at first blush.
What's more important is what follows and unfortunately we'll have to wait until we catch up with time. Sadly my time machine is off-line, as the temporal mechanic who normally services the box is stuck in a gasoline station line up.
Smart car into the US. The diesel engined version uses 3.4litres/100km
in combined urban/non-urban rating. That's 69.1 miles/US gallon. By careful
driving and avoiding rush hour I get 75 miles to the US gallon out of mine.
They are strictly 2 seat with very little luggage space but for the
2 seats they are more spacious than many European cars. They have a top speed of 135km/hour (84 miles/Hr) and accelerate 0 to 100km/h (0 to 62 miles
/hour) in 19.8s. Not sports car performance I admit but good enough for daily use. They are about the cheapest car on the market and less the 40%
of the cheapest hybrid. You wouldn't believe how easy it is to find somewhere to park in the most crowded town. Facing into the curb they stick out less most European cars parked along the curb (let alone American cars) and need just 1.6m (63in) of curb space
see:- http://news.bbc.co.uk/2/hi/uk_news/magazine/3660685.stm
IF we really started to think that energy was a more immediate threat than smog, we'd let things like the smart in. Will that happen?
Does anybody know if the Smart could be made to pass U.S. crashworthiness tests?
I'm trying to put some historical perspective on the effects of losing 1MM BPD of gasoline output (per EIA report of 1 September). The data is pretty hard to to read because of cyclical fluctuations and the efects of external events. But for persective, courtesy of economagic.com:
"Finished Motor Gasoline Stock Changes"
in thousand barrels per day
Arab Oil Embargo
10/19/73 through 3/16/74
1973 07 100.193548
1973 08 -205.903226
1973 09 172.333333
1973 10 137.129032
1973 11 -239.733333 This is normally a month when inventories build
1973 12 66.451613
1974 01 260.129032
1974 02 55.821429
1974 03 40.064516
1974 04 115.266667
1974 05 -164.322581
1974 06 -43.000000
1974 07 47.354839
1974 08 3.709677
1974 09 268.866667
1974 10 -202.354839
1974 11 -78.433333
1974 12 -1.096774
Iranian Revolution
c. 12/25/78 until ?
1978 11 228.333333
1978 12 562.483871
1979 01 614.258065
1979 02 -158.178571
1979 03 -402.612903
1979 04 -113.333333
1979 05 -262.645161
1979 06 85.200000
1979 07 338.161290
1979 08 -283.258065
1979 09 -105.500000
1979 10 -370.451613
1979 11 80.000000
1979 12 536.193548
Iraq invades Kuwait 8/2/90
First Gulf War begins 1/15/91
1990 07 133.129032
1990 08 -233.451613
1990 09 510.966667
1990 10 -244.451613
1990 11 -108.233333
1990 12 118.741935
1991 01 162.258065
1991 02 -252.321429
1991 03 -236.193548
1991 04 -66.800000
1991 05 94.709677
1991 06 160.033333
1991 07 -177.096774
1991 08 6.806452
1991 09 195.400000
1991 10 -354.419355
1991 11 227.900000
1991 12 267.032258
If I'm reading this properly, these numbers reflect net inventories, that is (total production minus total consumption). So, in a hypothetical situation, if consumption stayed unchanged, and daily production dropped by 1mm bpd, we'd see a -1000 in these numbers. In the event of stock outages, inventory reduction numbers would presumably be smaller, because people could not buy and hence would not reduce inventories. If gasoline were in stock, and panic buying ensued, inventory drops would exceed the loss in refinery capacity.
My conclusion: we're facing a HUGE gasoline loss by historical standards, beginning at a time when inventories were already low.
Are there better intrepretations on this?