Open thread
Posted by Yankee on September 24, 2005 - 11:48am
We're leaving an open thread for now. We hope to have information about the effects of the storm soon. Update [2005-9-24 12:9:33 by Prof. Goose]:I've done a preliminary damage assessment below based on the KAC/UCF models, etc.
“The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences…”
—Winston Churchill, November 1936
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Ask for short term gasoline conservation from the general public and/or raise the gasoline tax to pay for Katrina/Rita damage
Also maybe anticipate the next disaster - people freezing or going bankrupt in the Midwest and Northeast this winter paying for Natural Gas or Oil heat. Maybe we could start better insulating homes now?
http://www.greencarcongress.com/2005/09/ford_asks_bush_.html
FWIW, Ford may have some frustration about that situation ... but energy might be better spent finding/creating US suppliers.
What exactly is he afraid of that would make him hide out there during a national crisis, or is he to be perceived as the military leader directing FEMA and giving orders from there?
11:00 a.m.: In Colorado, President Bush received an hour-long update this morning from military leaders at the U.S. Northern Command and from other federal officials via videoconference. "It comforts me knowing that our federal government is well-organized and well-prepared to deal with Rita," Bush said. "The first order of business now is search and rescue teams -- to pull people out of harm's way." Bush warned people who evacuated from coastal areas to be careful about returning home.
http://online.wsj.com/article/0,,SB112731385505947351,00.html?mod=special_coverage
http://www.ucomics.com/tonyauth/2005/09/23/
http://www.msnbc.msn.com/id/9463993/
http://dailykos.com/story/2005/9/24/142248/079
http://www.afterdowningstreet.org/images/warprotest/index.htm
Meanwhile, I don't understand why a lot of peak oilers are saying the peak will be several years away. Perhaps that's true for the maximum-ever production year. But a more important measure would seem to be the point at which supply cannot be increased to meet projected demand?
Finally, it's been asked several times here, and never really answered: Why does the price of oil go up when refineries are hit?
Thanks,
Chris
Say you are a Sheik and you've just filled a tanker with crude but have not yet committed that tanker into sailing to the East or sailing to the West. You're waiting for the markets to tell you which is the best direction (maximum profits) to aim your tanker as you start collecting bids from potential buyers.
All of a sudden you hear that Allah has smitten the infidels in the West with a devastating storm (--praised be his name). Their refinery capacity is down. They will not be able to buy your tanker full of oil because they have no immediate use for the oil. So you turn your tanker East.
It will take a few weeks or months for your tanker to show up in port. Futures traders in the West see this tanker turning happening not only for your tanker, but a lot of others. They realize there will be no oil heading West for a while. The refinery shortage has led to an oil flow curtailment in that direction.
OK that was a crude (and rude) attempt at an explanation. Does it help?
But that still doesn't make sense to me. I'm assuming they don't direct multiple tankers, covering long time periods, simultaneously. Each tanker is an individual decision based on profit, which can be contracted in advance. And I'm assuming that one tanker more or less will not affect oil price significantly.
So, the oil price starts to inch upward because of the expected shortfall... and the next tanker gets directed to the storm-damaged area. End of problem... right?
Chris
If YOU ARE THE SHEIK, you do not want crude to start accumulating at a refinery that cannot absorb the oil flow because that will cause local crude prices to collapse, and it will be lost opportunity elsewhere. Remember, YOU as the sheik want high prices combined with high volumes. Your proft is basically the sum of (Price at refinery #1) times (Quantity absorbed at Refinery #1) + P2*Q2 + P3*Q3 +... You use a computer to plan out which routes your oil volumes should move along to maximize this sum in each projected time period. So if Q1 (Quantity absorbable at location #1) is trending down, you divert your quatity flow to another location where the quantity can be absorbed at a relatively better price. You do not want elastic prices to develop at any location, you want to operate at the threshold of elasticity. That is why you are a member of OPEC. The markets do not control you, you control the markets. You can do this because your customers are addicted to the product. They must have it, more and more, no matter what the costs.
Most of the refineries are made to process light-sweet crudes and the price of those are gone up. But on the other hand heavy-sour crudes are sold on discount at the moment. So, when a refinery that can process heavy-sour (for example Valeros refineries are such) goes offline, there's even more pressure to process light-sweet that other refineries can handle and it's price goes up.
Concerning peakguy's comments, when you refer to a real leader, do you mean the leader of the US, or of an oil company, or some leader of people with their best interests in mind?
As far as the current administration, recall the tight family links to the oils. I am certain that the interests of the oils are very much different than that of ordinary people. Particularly when considering that today's values are based solely on the short term outlook, i.e. maximize short term profits.
Peakguy then goes on to address the possibilty of people being forced into bankruptcy later this year. Please recall that the administration and credit card companies were able to push through a significant change to the bankruptcy laws, which unlike before may force people into "servitude" for many years to pay back their debts and significantly reducing their ability to continue to purchase "things" at the same level out of their remaining disposable income.
Note how after Katrina the oils and Citibank were successful in declaring a force majeur in order that they did not have to honor their delivery contracts due to the huricane. But at the same time no individual was able to decalre a force majeur on their home payments due to the huricane's impact on their jobs/livelihood. Nor did Congress pass the legistlation to delay the implementation of the bankruptcy changes for the people impacted by Katrina.
Concering ChrisPhoenix' comments about the disconnect between the price of oil and refined products, the issue is not one of classical economics and the relationship between supply/demand for an end product and the elements that go into production.
What drives the price today is the "market" that seemingly is manipulated just as, essentially all agree, that the gold markets are being manipulated. The markets view and trade the "oil complex." I doubt that the trading desk at Citibank takes delivery of much physical oil; so, to them the oil complex is just an accounting entry to trade. Since they and the major oil complex traders are also "primary dealers" and they coordinate on a daily basis with the Federal Reserves' Bank of New York Trading Desk on each day's trading activites, the price of oil traded is also likely now approached as part of the economic policy by the administration. (I am not making this up, see the Fed NY Bank web site.)
Along a similar vain, with the administration (MMS) giving figures that the loss of yearly production out of the GoM is about 5 percent, why is crude not higher based on a reduction in supply? Has demand significantly fallen? I doubt it based on all those cars burning up gas in the parking lots leaving the Houston area and the governor of Georgia (I believe) taking early snow days next week to delay consumption. Also, all the planes, military and other, flying both in the US and in other theaters of operations burn up quite a bit of fuel.
I kept the term "leader" vague because I think all levels of government and society should take this seriously and take action to head off disaster.
You weren't combative, but frustrated like the rest of us.
http://www.forextv.com/FT/AFX/ShowStory.jsp?seq=4600
The reason the prices of natural gas did not soar on the futures markets Friday is that the force majeure did not apply to the currently traded contracts. However, should the Henry Hub not reopen for another day or so, I would expect 'spot' (immeadiate delivery) prices for NG to start soaring.
Yes demand has fallen. The primary user of oil are refineries, refinery inputs has been down since Katrina hit. So you have simultaneously a production and a demand drop which seem to have frozen the oil prices around $65.
Even if I did agree, which I do not (nor do I disagree but bear with me), why, pray tell, would it even matter if the gold market was manipulated?
Those that believe Gold will one day arise again as the only true store of value are living in a dream world.
And I trade the stuff.
There's just too little of the stuff in common circulation to make it usable for exchange. No, if hell in a handbasket comes along our way, it will largely be the self-reliant folks, and those with all the guns, that make their way through - not those with hordes of gold.
10 thousand gallons of gasoline might not be a bad stash either.
[1] http://www.weatherimages.org/data/imag287.html
- The LOOP, how much storm surge hit it?
- The Refineries around the land fall.
- The Pipeline; it is above ground there?
- Rain induced flooding effects.
- Howard's Hub?
- Offshore platforms.
- Offshore pipelines.
- Status of the inland energy storage, for example gasoline in NJ and winter heating oil inventories.
What else?
http://search.newyorkfed.org/search/frbny.jsp?querybox=primary+dealers&search_submit.x=37&se arch_submit.y=3
Nevertheless, considering that as of last week's NYSE report, about 3/4's of all trades on the NYSE were "program trades" (trades involving baskets of 15 or more stocks), there is an intersection or confluence of less than 2 dozen entities coordinated by the Fed Trading Desk that controls most of the markets including the oil complex futures.
Since the Fed's Trading Desk is actively managed by a single person (and few others), the control of stock, bond, and commodity prices is in the direct control of just a few. Nor does the size or "strength" of a Citibank matter. First, even one tiny flea makes the dog scratch. Second, the number of bank tellers or ATMs do not impact the trading units of those few institutions. Third, the Fed site announces with pride that the primary dealers are not supervised.
So, all the dots are there, and they are close enough that drawing a straight line between them does not at all seem unreasonable.
Starting mainly in the 1970s there has been considerable R &D activity on harnessing wave energy. However, most of this has been undertaken by European countries, most notably the UK, Norway, and The Netherlands. The problems are now fairly well understood, but most of the various devices for harnessing wave energy have serious drawbacks and less-than-favorable economics. As of this date there are only a handful of full-scale wave energy converters in commercial operation (Scotland and very soon, Portugal).
As you alluded, a further obstacle to practical wave energy converters is storm survivabiliy (more that one test unit has been battered to smithereens during severe storm conditions). While some systems can operate on the ocean floor in shallow water and thus afford protection from severe storms, placement on the ocean floor creates its own set of problems and costs.
Though it may seem counter-intuitive, once does NOT want to absorb wave energy during a hurricane, as such energy levels are several orders of magnitude greater than that of normal wave conditions. Rather, one wants the device to sort of 'ride out' a severe storm and resume operation after the storm has passed. Depending on the particular design, there are a number of ways this can be done, not all being totally successful. Essentially, the vast energy content of a hurricane is useless.
Areas such as the Gulf of Mexico, despite the severity of their storms, actually have rather poor average wave power potential. Unfortunately, some of the best areas are where not all that much energy is needed, such as the nortwestern tip of Scotland, western Ireland, parts of Norway, and to a much lesser extent, Portugal. Southern Australia and New Zealand are also good. Many of these areas have average wave power levels of 50 to 60 kw per linear meter of wave front (i.e, measured perpendicular to the direction of the wave). Most of the US Atlantic coast line has power levels on the order of 25 to 30 kw/meter. The Gulf of Mexico and the tropics, even less.
Because of hydrodynamic effects, many wave energy converters can absorb energy from an 'effective wave front' that is considerable wider than the actual physical width of the device itself. Nevertheless, once all the conversion losses are taken into account, a real-world wave energy converter would be lucky to convert 30% of the theoretical wave power into actual usable electrical power.
While wave power is technically very interesting (one of my own interests), it appears that it will at best only be a minor and highly localized energy source.
http://news.yahoo.com/s/ap/20050923/ap_on_sc/rita_wishful_thinking
According to the center for atmospheric research, the heat energy released by a hurricane equals 50 to 200 trillion watts or about the same amount of energy released by exploding a 10-megaton nuclear bomb every 20 minutes.
There is merely a shortage in mankind's ability and enginuity to usefully tap into this massive amount of energy that collects right here by our Gulf Coast shorelines. Thanks to GreenHouseGasses (GHG's), out planet is trapping more energy than in the thousand earlier years of our current glacial cooling period. We only need to figure out how tap into it and use it.
What if Global Warming Bush (GWB) had spent $87 Billion on Hurricane energy conversion R&D instead of Iraq? Then we would not need much of their oil. Many would be gainfully employed on the energy conversions technology area. And some of our sons who made the "ultimate sacrifice" would still be here with us in an unsacrificed state, right next to their Gold Star and one demerit mothers.
Of course, GW Bush does not believe in Global Warming. He thinks it's a fairy tale. GWB instead believes in an invisible magic hand that automatically makes everything good and "right" in the world, Adam Smith's hand.
BTW, CSPAN was replaying a 1994 interview with Milton Friedman (author of "Free to Choose") the other day. It was interesting to hear Milton admit that our society is so screwed up and complicated that there is no one person who knows how to make a pencil. Milton, of course, thinks that is a "good" thing.
Transcript of 1994 interview: http://www.booknotes.org/Transcript/?ProgramID=1226
http://www.nypost.com/postopinion/opedcolumnists/53032.htm [free registration required]
http://www.cnn.com/2005/WEATHER/09/24/rita/index.html
[QUOTE]ABBEVILLE, La. (CNN) -- A distillate used in processing natural gas was leaking Saturday night from a rupture at Henry Hub in Louisiana, which connects numerous natural gas pipelines in the region, but state officials said the incident posed no danger to residents.
Henry Hub is at the Sabine Pipe Line Henry Gas Processing Plant in Erath, La., part of Vermilion Parish. Vermilion was one of the three parishes worst hit by Hurricane Rita.
The officials said the chemical was leaking from a tank into a levee meant to contain such spills. The cause of the leak was being investigated. (Posted 10:15 p.m.)[/QUOTE]
http://edition.cnn.com/2005/US/09/24/news.update.sat/
http://econlog.econlib.org/archives/2005/09/our_vast_oil_re_1.html
excerpt from TR Elliot comment:
... Of course, right now we've got a bunch of clueless people running the govt who think that intelligent design is science. So the libertarians and free markets types (of which I am largely a member) have a point: govt is pretty clueless. But if it ain't gonna happen in the private sector, then govt has to be fixed.
Consider this: if the world cannot create new sources of energy, like increasing oil production, demand will have to be reduced. The existing fields are depleting. Some of them fast. Technology is helping--helping to pull the oil out and deplete the fields even faster. At some point, if we can't find alternatives, the economy will recess. Imbalances with China and others (all that debt) will unwind. Demand for energy will go down. That means we'll have plenty of oil production capacity. That means there is little incentive for the private sector to develop alternatives. Prices don't support it. And they are too short-sighted--they're already losing a lot of money because the price of energy dropped--they're hurting. Then demand starts picking up, and boom, we run back into the production limits again.
http://online.wsj.com/documents/info-flash05a.html?project=gulfoil0509&h=450&w=780&hasAd =1','gulfoil0509','toolbar=no,location=no,scrollbars=no,width=780,height=627,left=40,top=10'
"Anxiety about running out of natural resources dates at least to the time of ancient Greece. The truth is that the price of virtually every commodity--agricultural, mineral, and energy--has fallen steadily throughout the 20th century relative to wages. A declining price is an indication of
greater abundance, not greater scarcity.
... The price of fuel has fallen so sharply since the last OPEC oil embargo that "oil is now cheaper than water," according to a 1999 Associated Press bulletin. Fifty years ago the world had about 20 years' worth of known reserves of oil. Thanks to technological innovation, which is outstripping the pace of depletion of reserves, the world now has at least 50 years of reserves."
from: http://www.cato.org/pubs/pas/pa364.pdf
Wow. We humans are so smart and so rational thinking. A fictional number ("price") fabricated by delusional humans as they "negotiate" fair and balanced deals between each other proves that there is an abundance of oil for the next 50 years (50 being a number randomly pulled out of someone's hat).
1) I attended Common Ground, a large agricultural fair in Maine yesterday, featuring a speaker on Peak Oil. He had an audience of hundreds, lounging on the grass in the sun, waiting to hear about this hot topic. This is not your normal midway-rides-and fried-dough fair: it's about organic agriculture (as well as horseshit like Reiki and crystal rubbing).
This speaker sucked. As he rambled and rambled, I kept saying, between my teeth, "why don't you frickin describe what peak oil is first?" At one point he mentioned "the tars sands in Alaska." At another, he said that Hubbert "predicted we would run out of oil in 1970." I was so disgusted I had to leave the event.
2) Discussion about peak oil has descended to barely intelligible arcana on these boards. I learned about this in 1982, when I was a geology major. My professor wrote an earlier paper about this subject. I rediscovered it at the end of 2003 and have read thousands of pages in my free time.
And yet, given the numbers and equations being pushed back and forth among the various parties, I no longer know what to believe. I consider myself a lay reader, but a very good one. What happens when the lay readers begin to tune out?
How do we resimplify the information, to know what is worth hanging onto?
We have reached the End of Easy Oil:
http://www.chevron.com/about/real_issues.asp
look also at: http://www.postcarbon.org/node/402
In my opinion, it's like trying to talk to an addict about stopping their habit. No amount of logic really works until they can't get their fix.
http://www.npr.org/templates/story/story.php?storyId=4862885