The impact seems widespread, but there is hope

I was talking to a company located high up the North East coast this morning, and I had expected that Katrina would, as yet, have had little impact on them.  But their major distribution center was in New Orleans, and they have not been able to reach anyone down there yet.  At the same time they are already paying $4 a gallon for gas. Prices, and availability are becoming a concern around the country, with some stations already imposing a form of rationing (only 10 gallons or less) while others, with intermittent deliveries from suppliers, are forced to a restrictive policy by that alone.

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.

......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.

But given that motorists are willing to pay more, since they must have the gas to be mobile, this altruism will be rare.  

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 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.

. 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.
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: , , , ,
While I appreciate the European offer and I hope people actually appreciate the magnitude of this gesture, I kind of wish they would instead offer our government some technical assistance on how to reduce consumption. They sure need it!
Well, we know our US companies already sell thrifty little cars in Europe.  The reasons they haven't sold them here in the past are multiple, but like the 70's, this might be sufficient reason to get some of them kicked over here.

(I alwasy picture fat, sweating, cigar smoking, guys in Detroit refusing to change at times like this.)

If you own GM, sell now.
The day after Katrina hit, GM announced that it was basing its future growth strategy on SUVs and trucks. I'm not making this up. The extent of their cluelessness is astonishing. Its not for nothing that their bonds are junk.
Hmmm - I always picture upper-middle class housewives hauling their children  to soccer practice in enormous SUVs.
The governor of Michigan (Jennifer Granholm) has pledged to investigate "price gouging" by gas stations and levy fines upon the "guilty".

This can only have one of two effects:

  1. Transfer the markups from the sellers to the distributors and refiners.  (Makes one wonder who supported her election...)
  2. 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.
You guys seem to have missed some items of good news (link).  Capline is back in limited operation, and the Plantation pipeline.  The damage at Port Fourchon doesn't seem to be all that bad, and the biggest problem is getting electricity restored.  The LOOP started pumping operations, and the Valero St. Charles refinery just restored power and had 1/4 of their workers show.  Plus the EPA just issued a limited waiver on gasoline requirements.  Could all these things be why gasoline has retreated from its high prices the other day?
What does "a limited waiver on gasoline requirements" mean?
If I'm not mistaken, it means we can draw on winter fuel stocks now which normally cannot be sold until after September 15.  The summer stocks have anti-smog additives which the winter stocks don't  By letting us use winter stocks we can lessen the impact of the refinery outages while the refineries get back into operation.  It will mean a little addition smog in some areas, so there is some downside.
Thanks for the information, I thought it would be something like that.

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.

Mr Verdon, you seem to imply over at your place that we've systematically missed the good news over the past day.

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.

Prof. Goose-

can this site do instant polls?

Scoop has the capability to do polls, but I disabled them at the start. I would like to get them working at some point, but I've been busy just keeping the site alive.

Look for polls and a lot more other features to be rolled out in the coming weeks!

I dislike polls.  Popularity contests or poor assumptions shouldn't hold the same weight as data.  To quote Opus from Bloom County "Just because a million people do a stupid thing doesn't mean it is not a stupid thing"

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.

DOes anyone know how IEA programs work?  That is, is th eoi'gasoline lent to the US and must be returned later - or is it just purchased from them?


Prof. Goose,

So, you can attempt to impugn all you wish.

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.

It's not sensitivity.  (Are you kidding?)  I just didn't care for your implication/impugnation that TOD was systematically ignoring the limited amount of good news (the irony being that you were commenting in a thread that was actually contained some of that good news) that was out there.  It seems to me that we do what we can to be fair, balanced, and objective around here.

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.

It's not sensitivity.  (Are you kidding?)  I just didn't care for your implication/impugnation that TOD was systematically ignoring the limited amount of good news (the irony being that you were commenting in a thread that was actually contained some of that good news) that was out there.

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.

Still, please understand that we don't have some kind of "dark" wish that prices are going to go to $10/gal.

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,

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.

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.


In my view you reflect the classic rossy views that extreme freemarketeers use all the time.

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.

Steve you're unbelievable.

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.


Now, now...everybody chill.  I didn't take any offense to anything Steve said except for the "systematically missing the good news" idea part of his comment here and over at his place...that's all.  

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 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, 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.


Markets act on what is known at the time or can reasonably be assumed, but there are always two sides to every trade - one trader sells because he's afraid, or hoping, prices will go lower, another buyers for exactly the opposite reasons.

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.

How about campaigning for the swifter introduction of the Daimler-Chrysler
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
That's an interesting question.  The 69 mpg Smart is a diesel, and not legal under any US state's smog laws.  My state (CA) in particular does not like small diesel cars (for some reason its easier to buy a diesel king-cab 4x4 pickup).

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?

Those things are sort of cute, but I doubt I would want to commute in one on an Interstate or beltway. Even though I assume there would be an airbag, there's just no room for a crumple zone. In an accident, a crumple zone plus an airbag could be a lot less injurious than just an airbag.

Does anybody know if the Smart could be made to pass U.S. crashworthiness tests?

That part is done, there is a gas version for sale in ... 45 states or whatever.  But once it is US - smogged I don't believe it gets the European gasoline MPG either.
When 9/11 happened Jennifer Granholm was Michigan's Attorney General.  She succeded in prosecuting price gougers at both the retail and wholesale levels. The guilty parties agreed to sell at a loss for a few weeks as compensation to the public.  Any price gougers now ought to remember that in the long run it'll cost them.
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

"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?

let me do some digging on this Rick.  That's a great find.  email me if you have something you want to put together on this.