Open thread

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.
Any ideas out there on what a real leader would do right now. Here's mine:

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?

Did you see the Green Car Congress story about Bill Ford Jr.'s call for a new energy summit?  Alomst enough to make one an optimist:

Yes, I think that's great. Didn't they complain in the same breath that the Japanese were stealing all the critical parts for hybrids?
I believe the makers of appropriate batteries are all in Japan.  It would be kind of funny if someone did complain about them using "our" batteries.  Reminiscent of other people owning "our" oil.

FWIW, Ford may have some frustration about that situation ... but energy might be better spent finding/creating US suppliers.

american car makers are so far behind the japanese that ford licensed hybrid tech from toyota
Interesting that the President has decided to ride out the storm at Peterson Air Force Base, which also has a nuclear war protected bunker deep inside the adjacent Colorado mountain.  This, of course, is being downplayed by the major media.  

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.,,SB112731385505947351,00.html?mod=special_coverage

Oh yeh. Great Leader brings "COMFORT" noises to his sheeple while he hides in a spider hole deep in the mountain. Maybe Billy the Goat lives inside the mountain? Billy need "comfort" in these times of stress.
Why Bush canceled his trip to Texas yesterday: "Another White House official involved in preparing Mr. Bush's way noted that with the sun shining so brightly in San Antonio, the images of Mr. Bush from here might not have made it clear to viewers that he was dealing with an approaching storm."
I also like this Tony Auth cartoon:

The right wing is setting up the military as the only legitimate "can-do" part of the US government. Forget about all this civilian crap...
Exactly! The people of his country chased Bush out of Washington, and the hurricane chased him out of his home state. The poor guy had to hole up in a mountain bunker.
I'm debating with a friend about Peak Oil. Can someone point me to a spreadsheet or at least a table that shows the various capacity declines and possible new sources over the next ten years? I've looked here and at ASPO and have seen lots of articles but no raw data.

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?


probably the EIA would be the quickest for raw data.  ODAC as well.
Chris, I'm no expert on this, but I recall someone explaining the refinery capacity thing using an oil tanker hypothetical.

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?

So it sounds like you're saying it's just an overcorrection. Refinery capacity falls, so a herd of oil shipments goes elsewhere, so then there'll be less oil than needed, so the price rises...

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?


Well, no.
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.
The explanation I have found is related to differences between heavy-sour and light-sweet crudes. When we talk about oil prices, we always talk about light-sweet crude prices (Brent, WTI). Heavy-sour crudes are cheaper and recently the spread between those have got bigger.

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.

Please excuse me if this post seems somewhat combative.

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.

Patents -

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.

In regards to the force majeure on natural gas, to the best of my knowledge, the Henry Hub has now been shut for about 48 hours.  This story explains it well:

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.

What drives the price today is the "market" that seemingly is manipulated just as, essentially all agree, that the gold markets are being manipulated
Of course the oil market is being manipulated. Why do you think the SPR is there for? as for speculation, I'm still looking for hard evidence that it is a significative force being the price increase over the last two years.
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?
 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.  
There is a significant volume in stocks that has been drawn down over the past week.  I suspect that with the loss in production from the GOMEX the refineries may have to petition for more oil from the SPR or risk running out, since while Rita was a Category 3 when it came ashore it was a lot stronger out in the Gulf where the rigs and platforms are. And it is going to take some time just to find out what the condition of those producers, and the production pipelines, are. So that even if there is little damage (sadly unlikely) just the time taken to check is going to be long enough for the supply shortfall to have an impact.
You'right, this time I expect a significant loss of supply without a loss of refinery capacity. Some platforms have endured both Katrina and Rita hurricane force winds (check this map).
[gold market], manipulated, as essentially all agree

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.

Anybody know of a storm surge forecast source.  There is this [1] but that's a private weather service with their own private hurricane model.


There is a storm serge model; I don't know how accurate they consider it to be.  I posted about it here:
What are the key questions at this point?

 - 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?

thanks for that bhyde...I forgot to mention pipelines and the LOOP in the damage assessment below.
Patents, I sympathize with much of what you say but I think your arguments might be more effective if they were less, as you put it, combative. It's clear enough that the Bush Administration puts its own first. Having said that, do be careful: primary dealers are the banks and brokers that trade government securities with the Federal Reserve Bank of New York. Firms have to meet stringent criteria to make the list of primary dealers. Citicorp is certainly among them but no oil company is. If you want to understand who the primary dealers are and what they do, click here: arch_submit.y=3
Of course the term "primary dealers" refers to bond traders. And the term major market participant" relates to the stock market and the "Plunge Protection Team."

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.

How much "energy" did Rita pack and what if that energy could have been converted into hydrogen energy or used to pump low- salt content water from the South East to the dry South West?
I recall a wind energy site saying a 1 sq meter vertical slice of air at 25 mph had 1 kw of power. Power increases with the cube of the speed so a 100 mph wind would pack a 64kw punch. There are 1,000,000 sq meters in 1 sq kilometer which would make 64 gigawatts per sq km. If the wind section for 100 mph was 5 km high and 20 km wide that would come to 6.4 terawatts. Extrapolate from there.
The accumulated wave energy must therefore be massive because wind energy accumulates additively as it drives waves. Is any group studying how to harness hurricane energy and convert it into say electricity? What kind of machine might survive out there in the ocean? Can it be submerged slightly to avoid the full brunt of the storm?
step back:

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.


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.

This kind of demonstrates that there is no shortage of "energy".

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:

12:35 a.m.: The Wall Street Journal's Steve LeVine reports from Port Arthur, Texas. Two major refineries here are standing in about four to five feet of floodwater from Rita. The flooding suggests there may be delays of several weeks in restarting the refineries, which could lead to gasoline-supply shortages and higher gas prices in the U.S. Valero Energy's 255,000-barrel-a-day refinery in Port Arthur is standing in floodwater, as is Motiva Enterprises's 285,000-barrel-a-day refinery. Royal Dutch/Shell affiliate Shell Oil Co. owns 50% of Motiva.
The New York Post has a very interesting article about the rivalry between China and Japan:  "The Coming War for Oil."  It compares the current situation to the incidents that led up to World War I.  "When the stakes are really vital, there always is a next time."  [free registration required]

The NY Post is overstating the present friction between China and Japan. But at least they're noticing what certainly could become a real problem. And note that the much-maligned Chinese are not to blame on this one. The right-wing Japanese Industry Minister Shoichi Nakagawa refused Chinese offers of joint development of offshore oil and gas deposits. A week or so ago in the Japanese business newspaper the Nikkei a Japanese think tank was described as arguing that it's too bad cooperation wasn't pursued. But thanks perhaps to the Koizumi regime's sense that they can safely poke sticks at China from between Bush's legs, we now have flash points for serious trouble if gas and oil prices increase further and supplies dwindle (as of course seems quite possible).
how many gallons of crude oil does it take to refine a gallon of gasoline?  does anyone know?  trying to determine the underlying (real) price of gasoline and oil....
somewhere between 2/3 and 1/3, by volume, depending mostly on the starting oil. Mexican Gulf crudes coming onshore in Alabama, Mississippi, and Texas tend to be light (low density, high API gravity, high thirties to forties is typical), and so can produce more gas. To compare, Californian crude oil is much heavier, typically has an API gravity of 10 or so, and requires much more processing to produce less gasoline.

how much gas per barrel

For a refinery with cat crackers, the oil-to-gasoline conversion is almost 30%.      
From CNN:

But Valero Energy reported Saturday that recovery teams found "significant damage" to its oil refinery in Port Arthur, Texas, following the hurricane. Shell reported wind damage to its Motiva facility in Port Arthur.


Damage to the vital concentration of oil refineries along the coast appeared relatively light, although industry officials said it was too early to assess whether there would be an impact on oil prices. Valero Energy Corp. (VLO) said its 255,000-barrel-per-day Port Arthur refinery sustained significant damage to two cooling towers and a flare stack, would need at least two weeks for repairs.
The leadership question is a good one.  Why would Chavez be shipping gasoline to help the American poor if we had a leadership that cared for the poor?  
The very important Henry Hub, the most important point for natural gas distribution in the US - and the delivery point for NY traded futures contracts, may have suffered damage:

[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]

In following up on the 1994 Milton Friedman interview, I ran across this economists' debate (Sept. 2005) re shale oil and peak oil:

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.

From the always-right world of economics, a 1999 prediction:

"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."


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).

I am becoming so dispirited.

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?

The thought tankers at Chevron make it simmple for the masses:

We have reached the End of Easy Oil:

look also at:

If you speak in generalities, people roll their eyes and ask for proof. If you show them your proof, they'll either dismiss it as fringe, or too complicated. And besides, if it were true, someone important would have told us.

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.

This NPR chat with the director of Port Fourchon is slightly interesting; not much concrete information.   But the part right at the end just before the reporter wraps it up is just hilarious.  He apparently has his own private leeve, which is "overtopping now" around his farm.  Where he and his brother have 16 thousand alligators.  The nervous laugh alone is worth the listen.