I wish I didn't have to be the wet blanket

Normally today I would be doing a technical talk, and it is just rarin' to go (it's about directional drilling,  down-hole-motors and diamond bits - see I knew you'd be thrilled) but I am going to put this off until tomorrow, because I would like to finish the thought of my last post.

And for this post I need to recognize David Williams who first pointed this out to us.  South Texas and Western Louisiana have an immediate problem, and the rest of us have a relatively intermediate term problem.  And it has to do with the immediate availability of gasoline.  As Rita came close to shore, gas stations all over the Gulf Coast began to run out of gas.  It was not really a long-term worry since the refineries were right there and could resupply.  But now they are no longer on-stream.  The folks that run them have followed instructions and are gone for about a week .  It is going to take some time to do the safety checks and repairs needed to get the facilities back to order, and then gas can, to a limited degree, begin to flow again.

But we have lost the stock reserve that has been eaten up in matching the lost production from Katrina, and so now it will be more difficult to bring up the refineries.  Not (and this is the good news) because of the sustained damage, (because the word running around is that this has been much less than anticipated) but because they are going to start running out of crude.

In New Orleans the refineries that are still down are bedeviled by the flooding and the lack of power, Port Arthur and the adjacent refineries have acquired the same problem. The latest reports suggest that it is going to take perhaps a month to get things back to "normal." But normal assumes that the category 5 Hurricane that Rita was as it came into the oil production zone did little damage.  There is no realistic viewpoint that can justify that assumption.

There were significant concerns about being able to repair the Katrina damage, since it was worse than that imposed by Ivan, last year.  But to pretend, as some of the MSM are already doing, that we are home free for the rest of the year, is more than irresponsible.  The fact that Georgia is closing schools for a couple of days to recognize the short term fuel problem is to minimize the concerns that should be going up as red flags all over the Eastern half of the country.

Right now the production from the Gulf is completely shut down. It is going to be that way for a while, as companies go back and bring the platforms back to life, and test the pipelines that will bring the oil to shore. Even with little damage the experience from Katrina suggests that this is going to take at least a month.  In the interim the pipelines supplied by the Texas and Louisiana refineries may begin to see a supply problem.  Luckily they are near the major storage of the SPR, though even that has a limit to the amount that can be easily made available.  Remember also that we are in a world where the foundation ground is disappearing due to flooding and storm activity.  The response of the MSM so far is still a "we dodged a bullet" but unfortunately we haven't taken our shirt off yet.

But then, on the other hand, maybe global warming will make this a really mild winter.  If you live in somewhere such as Maine, perhaps you'd better start hoping that that will be the case,

Nothing scientific here, just a wild ass guess. Authorities are asking evacuees to stay where they are for a couple of days. Gasoline supplies are needed to run the emergency vehicles. There could be a million vehicles out there running (or not)on empty. At 15 gal. each and 1/3 refinery conversion, that's an immediate unsatisfied demand for about a millon barrels of crude when they try to come home.

Should be easily resolvable, but we've been living such a hand-to-mouth existence for gas that finding that small amount extra could be difficult without new conservation measures. So, in the short term prices might rise again, and there will be even more pressure from elected officials to haul the big oil guys in front of committees to show how responsive (or not) the administration is.  Can the administration talk it out, or might they be forced into doing something? In other words, is the business-as-usual scenario about to change?

Please talk about the Henry Hub.  I heard talk that there were serious issues or damage to the hub, but it's all anecdoctal so far...
so true, and believe me, we have feelers out on it.  It will take a couple of days, I am guessing, before even we'll get an assessment of it...depends on the availability of electricity, etc., as well, which could take a couple of days.  believe me, we want to know too.
This story implies two problems:

a gas leak and a spill

[QUOTE]A key natural gas installation in southern Louisiana known as Henry Hub, through which a third of the nation's natural gas flows and where spot gas prices are determined, was damaged by Rita, Louisiana Gov. Kathleen Blanco said.

"We understand there is a gas leak and ... a possible shearing of an oil storage tank," Blanco told CNN.

She gave no other details about the damage or its effects on gas delivery, but said the leak would have to be plugged.

"We're watching the situation very carefully," Blanco said.[/QUOTE]

http://today.reuters.com/news/newsArticleSearch.aspx?storyID=66903+25-Sep-2005+RTRS&srch=Henry+H ub

From CNN
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.)

just in case you're all curious..."Henry Hub is the pricing point for natural gas futures contracts traded in the New York Mercantile Exchange, or NYMEX. It is a point on the natural gas pipeline system in southern Louisiana. It is owned by Sabine Pipe Line LLC.

It interconnects with nine interstate and four intrastate pipelines: Acadian, Columbia Gulf, Gulf South Pipeline, Bridgeline, NGPL, Sea Robin, Southern, Texas Gas, Transco, Trunkline, Jefferson Island, and Sabine. The two compressor stations can compress 520,000 decatherm/d (6.3 GW) . The transportation capacity is 1.8 billion ft³/d (590 m³/s)."

What is the difference between

Nymex Henry Hub

Henry Hub

and New York City Gate?

And why do they differ so much?

NYMEX HB = $12.32 and Henry Hub is $2 more. NYC Gate is $15.

Could someone explain those numbers?

Not sure on your Henry Hub price vs Henry Hub NYMEX, maybe spot vs future (today vs next month) but NYC gate is the citygate price for gas physically in NYC vs Henry Hub in Lousiana. Transport fees and fuel usage would make NY MMBTU more expensive than HH MMBTU.
I think that your assement is going to become self evident in the following weeks, if not days.  This is NOT a made for T.V. movie where all is well at the commerical break.  There is this strong tendency in America today that unless something is 110% completely utterly and hopelessly wiped out, then the message becomes everything is O.K. and we will be fine.  The "spin" factor in this country is so widespread, from financial to political news and everything in between.  Positive thinking does not create gasoline, just like fudging the books does not "creat" profits for bankrupt companies.  
The energy company where I am employed has kept quiet about significant damages sustained by our oil drilling rigs and platforms from Katrina, never mind any other yet unknown damages caused by Rita. I can't help but think that other companies are doing the same. This can only mean that oil supply will be tighter than what some people may think. In the short-term, I believe we will see not only higher gas & heat prices, but also higher oil prices as well.
I assume that there is no law or regulation that is forcing energy companies to report the damage they sustained because of a natural catastrophe..?

If not, it's somewhat predictable that they won't.

The MMS requires GOM operators to report; so far, they are being quiet.

Saturday shut-in stats:


  These evacuations are equivalent to 79.73% of 819 manned platforms and 68.66% of 134 rigs currently operating in the Gulf of Mexico (GOM).

Today's shut-in oil production is 1,500,898 BOPD.  This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today's shut-in gas production is 7.488 BCFPD.  This shut-in gas production is equivalent to 74.88% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-9/24/05 is 31,781,559 bbls, which is equivalent to 5.805 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-9/24/05 is 147.991 BCF, which is equivalent to 4.05% of the yearly production of gas in the GOM (approximately 3.65 TCF).

"I assume that there is no law or regulation that is forcing energy companies to report the damage"

Publicly traded companies are very careful with how they release material information about their operations.  The rules, strategy, and tactics of that are very mature.  A publicly traded company can't hide materially significant bad news for too terribly long without taking some very significant risks.  But timing the release is a tactically complex mess; particularly because being totally transparent can get you into trouble because it's likely to lead to a very inconsistent message stream.  The market really really doesn't reward an inconsistent message coming out of a company.

Hey this is interesting. Someones taking on simmons


there's a discussion of your linked story, including comments by heading out, here.
yeah im starting to doubt Simmons. I really admire him, but he's making some bold predictions that could easily turn out to be false and then hurt the name of "peak oil" since he is the most mainstream.

However, this piece you posted seems optimistic and fails to mention that SA recently admitted that they will be unable to keep up with demand in 10 - 15 years.

So who knows?

The article critical of Simmons neatly avoids his main points by pretending to deal with them. For example, Simmons wrote about the water cut in Saudi fields, not the use of water per se. But the article's author is a Halliburton man, so maybe he talked to Cheney and Karl Rove about how to obfuscate the issues. As for Simmons' predictions, I agree it's risky to specify numbers that people can use to beat you with later if you're off. But does anyone hold economists to account for their predictions? (just a joke!) Seriously, we all seem fairly certain that gasoline and heating oil and other product prices are likely to get more expensive or at least not drop for a long while. No one will remember Simmons said $100 per barrel or whatever because for most people the proof of the peak oil pudding is in the eating of high prices. At the institutional level, having Simmons out there speaking on peak oil already has initiated a movement to get serious data on reserves and so on. That trend's not likely to go away, so he's done all of us and our kids a big favour.
I think that one of the most important and revealing, yet almost completely overlooked, details about our current situation is something Simmons said in an interview.

Go to http://www.globalpublicmedia.com/transcripts/212 and check the last question and answer.  The interviewer asked Simmons what Bush wants the American public to know about peak oil, and he says Bush told him  "Matt, you continue to speak out, loudly and honestly, about how serious our energy problems are. You have no axe to grind and it really helps."

To me, this sounds like Bush and his advisors are well aware of the proximity of peak oil.  (I'm amazed by how often the question is discussed about whether Bush or some large corporation or another "knows about peak oil".  I think those entities would have to be phenomenally stupid not to know, and we should assume that they do know until we're presented with very strong evidence to the contrary.)

I suppose the cynics could say that Bush doesn't believe in peak oil, but he knows that having people like Simmons talking about it justifies higher prices which helps Bush's oil industry friends.  Even as cynical as I get with American politics I'm not ready to make that assumption without solid evidence.  

(And yes, I'm intentionally ignoring the possibility that Simmons is simply lying about what Bush has said to him.)

autumn 1999, cheney speaks to the london institute of petroleum about peak oil

september 2000, cheney's PNAC complains the oil wars will be slow to get started without a "new pearl harbor" to rally support.

may 2001, cheney calls for 1300 to 1900 new electric plants, most probably nukes

june 2001, cheney's National Energy Policy Development (NEPD) Group emphasizes nuclear and hydrogen

september 11, 2001

September 2002, peak oil is probably the primary cause of the wars. PNAC's september 2000 document "rebuilding america's defenses", laid it out pretty clearly, and government policy seems to be following it pretty closely, which shouldnt surprise anyone, since this document was adopted as the official bunnypants administration's "National Security Strategy in september 2002, in some places, verbatim.

PNAC's plan seems to be: grab all the oil possible to (1) hinder china's development into a military rival to the usa, and (2) grab all the oil possible to sell at the highest possible prices to finance the transition to a hydrogen economy.

at 10 billion bucks a clatter, how much are 1900 new nuke plants gonna cost?

"at 10 billion bucks a clatter, how much are 1900 new nuke plants gonna cost?"

Just imagine what investing that money into wind/solar/wave/geothermal would do... What a waste.

i should point out that PNAC's "rebuilding america's defenses", which lays out the plan we seem to be following, which was adopted as bunnypants' National Security Strategy, was also the document that called for the "new pearl harbor" to get the program started.
Since NYMEX is open early today (I wonder whose bright idea that was...) we get to see what market players think. Low volume so far (trading has only been open 5 minutes too) - fuel product futures are all down 3, 4, 5%.

HUX5 is off significantly - 1.89 down from 1.99 close Friday. A big %-wise move. Apparently someone believes they not only dodged a bullet but missed skinning their knees too.

Given the imperfect information available and low volume, I won't be too surprised to see prices all over the map today... these are the early indications only.

November delivery was quoted at $63.08, down $1.12. Heating oil dropped 7.6 cents to $1.8895 per gallon, while unleaded gasoline fell 10.16 cents to $1.984 gallon.

Crude Futures Fall in Rare Sunday Trading

have there been any real numbers yet? Or is this the markets sigh of relief that it missed houston?

Just goes to show how unpredictable the markets are.

But hey atleast its cheaper :)

"buy on rumor, sell on fact."
Something definitely smells fishy here.  Why would NYMEX open early?

In an earlier thread I asked whether refiners had to buy (at least some of) their crude through NYMEX contracts.  I didn't hear from anyone on this - maybe a stupid question - but if so it could explain a bit.  Downward pressure on price due to missing buyers as refiners aren't buying (first because they were too busy evacuating Houston, now because more refineries are offline).

In a somewhat similar manner, the mess that is causing gas stations to be out of fuel in TX could show up as a demand drop for fuels in the short term if deliveries aren't timely.

Higher in this thread, people were talking about the idea that oil and gas companies don't have to disclose how much damage was done by a storm.  Given that one of the most consistent points made by Matt Simmons is that we need to have full disclosure from oil and gas companies regarding reserves (specifically Saudi Aramco) then it makes sense to demand full disclosure regarding damages at oil and gas companies and refineries.

I, too, hate the constant spin in this country that talks about bullets being dodged just because we averted armagedeon.  

To not demand this full disclosure is to be as complicit as Humvee drivers in failing to prepare for the crisis to come -

Greetings!  This is my first post; it feels a bit strange.  However, I would like to point out what seems to be a manifest weakness in Ali Daneshy's critique of Simmons.  I don't have the data in front of me to confirm this, but I strongly suspect that Daneshy's citations of 3:1 and 12:1 water-oil ratios in Prudhoe Bay and Texas, respectively, actually lend strong support to Simmon's thesis when seen in the overall context of their production history.  Correct me if I am wrong, but is it not the case that BOTH Texas AND Prudhoe Bay are in an advanced stage of decline?  And is it not the case that Texas is producing a relatively small fraction of oil relative to its historic peak? If so, then these instances, far from supporting Daneshy's argument, actually undermine it for the following reason:

Daneshy's argument relies on drawing an analogy between the Saudi situation on the one hand, and Prudhoe Bay/Texas on the other.  But IF the analogy indeed holds, this means that by the time the Saudis get to 3:1, they too will be in a status of decline roughly mirroring where Prudhoe is now relative to the 10mb/d they produce now.  And once they get to 12:1, Saudi production will be a relatively insignificant trickle relative to what it is now - just like in Texas.  Given that the Saudi water cut is inexorably moving from its present 60% or so to the 75% prevailing at Prudhoe Bay, Daneshy's data and analogy prove that the day is not far off where Saudi will have reached a point in its production history analogous to that of Prudhoe at present - i.e., in manifest decline.

This raises a key question:  Does the analogy between the three cases above permit one to draw a general conclusion about a correlation between a specific water-cut ratio and the exact timing of production peak in that province?  Perhaps study of the historic data coming from Texas and Prudhoe will reveal this magic number to be somewhere in the range of 60% and 75% water cut?  If so, and if the general analogy that Daneshy is appealing to in his faulty argument holds, then maybe this can be the basis for predicting Saudi peaking, based on projecting current growth trends in ITS water-cut percentage.

The relevant web site for this is


It looks like for Prudhoe bay (scroll down quite a bit), rollover occurred when the water cut went through 50%, in 1992.  No idea if this is readily generalized or not, as it certainly depends upon well type (vertical vs. horizontal vs. MRC), etc.  However, the 50% number for the field "feels" intuitively correct, FWIW...

Open question here. I'm in Minnesota. My understanding up here is that virtually all of our gasoline in this state comes from several in state refineries. That's certianly good for us. Likewise, I understand that most of the oil used here comes from Canada. Makes sense, given the geographic proximity.

But where can I find out about natural gas? I, like many other, see the looming disaster that is the supply shortage of natural gas and am much more concerned about it rather than gasoline supply.

So, any idea where I find out where our NG comes from?

I'm in Minnie too thinking the same thing... wondering if I should make a last minute addition to the wood pile ;) ...
There is some information here and here and the most recent comments on the current status is here .
NG comes from the Gulf of Mexico, land based US - conventional and unconventional, and Canada. EnCana, the largest North American NG producer, alone produces something like 1.2BCF/day in the US (no gulf of mexico exposure - they perhaps had the foresight to sell that off earlier this year) and near 2.3 BCF/day in Canada.

To put that in context with the current GOM outages, EnCana's total output is about 3/8'ths of the total 7.5BCF shut out at present.

NG is in short supply. Big on-land producers can not makeup for significant shortfalls from GOM production (whether the shortfall is a result of off-shore issues or from damaged on-shore processing facilities).

"the machine stops" e. m. forster, 1909
I'm really curious to find out how the NG offshore rigs weathered Rita.  There's no NG SPR to bail our hides out this winter if production remains shut-in.  
The question about where does Minnesota's natural gas come from seems to contain the presumption that where it comes from makes any difference in how the winter's prices and supply will play out there.

My impression is that pipeline network for gas is sufficiently interconnected and redundant that at this point we are all in the same market for gas.  If New England needs it and is willing to pay more than Minnesota then prices will rise in Minnesota.  I.e. that supply will move pretty quickly toward were ever the demand has the most willingness to pay.

Is this correct?

For oil it seems less clear, to me.

Transport cost is a factor, and the main pipelines are built to transport from hole in the ground to burner tip in the most efficient manner. That said, everyone will compete equally for the available domestic supply, but some areas will pay a lot more than usual for transport and some areas may be disadvantaged by pipeline carrying capacity in atypical directions.
The inpliaction was not that it would affect price--we're in a national market--but more so supply.
Minnesota Nat. Gas & Etc:
  Here's a map I found
that is at least one company's map of canada/ minnesota/ wisc/ michigan nat-gas-pipeline. One of the offshoots is near me in rural duluth, mn. I assume the country is spider-webbed with pipelines like these. But whether we get canadian nat-gas or not in Minnesota, its all market priced, so I assume it will all go up at nearly same price, whereever you are.. or .. ?

PhilRelig: nice come-back comments on the UofHouston guy's critique of Simmons.

Knowledge/Etc. of Bush/Cheney: I'd rather not think about these two guys, but its hard not too, with their names pushed onto you day after day, and them being at the helm of U.S. ... I have no doubt that they (well, cheney) forsaw oil/gas/energy trouble coming, as he is on record of saying, and thus the iraq war,etc. as an attempted strategy to grab?stabilize???/get .. some oil. But whether these guys really know whats going on, or have a handle on things, i just really tend to doubt. (war doesnt seem to be going so well,etc) We all are often governed by rose-colored glasses / blinders / biases we have, and I am sure they are no differant.          - Lorax73

and what about the rose-colored glasses you are wearing that filter out cheney's motive, means and opportunity to stage 9/11?

your statement that you'd "rather not think about these two guys" disqualifies you from any serious discussion of how we got into the pickle we're in.

Demand for oil products in 2006 will exceed 100% refinery capacity in each and every quarter based on current demand projections. That was before the effect of hurricanes. 2006 winter is gonna be as cold as hell.
San Jose Mercury News

The gasoline outlook could get worse after damage assessments at large refineries in nearby Beaumont, Texas, and Lake Charles, La., which suffered the strongest winds and worst flooding.

In a statement Saturday afternoon, Royal Dutch Shell said that its Motiva refinery in Port Arthur, with a capacity of 285,000 barrels a day, sustained damage to a cooling tower.

Valero Energy Corp. said that its Port Arthur refinery, with a capacity of 255,000 barrels a day, sustained "significant damage to two cooling towers and a flare stack." The company anticipated that "it will take two weeks to a month to implement the necessary repairs and restart the refinery."

ExxonMobil didn't provide damage assessments for its massive Beaumont refinery, which has a capacity of 348,000 barrels a day. Citgo and ConocoPhillips didn't immediately discuss damage to their Lake Charles refineries, which have capacities of 324,000 and 239,000 barrels a day, respectively. The French company Total didn't report on damage to its 233,000-barrel-a-day refinery in Port Arthur.

http://www.southeasttexaslive.com/site/news.cfm?newsid=15275455&BRD=2287&PAG=461&dept_id =512588&rfi=6

At the ExxonMobil Corp. Beaumont refinery, spokeswoman Kathleen Jackson said by cell phone that the refinery is beginning to call selective crews who are key to restarting the refinery when electric power finally becomes available.

From a potential damage standpoint, Jackson said, "It didn't look too bad."

She said flaring looks "pretty good," and that's a result of some product level remaining in the towers. That is there to help the refinery units return to service when power returns, but there is no prediction when that might occur."

With regard to Simmons, I've posted at length on this at my own blog.  The point that I believe is being missed relates not to the inevitable decline in the Ghawar field, evidenced by water-cut ratios, but in what happens next.  The Saudis have been blessed and cursed with the ability to produce 10 MBD up until now by managing a small number of highly-productive wells in a handful of Supergiant fields.  At any point in time, it would always make more sense to squeeze those fields a little bit harder, rather than bringing a whole new field online, until you reach a point of diminishing returns.  

What the Saudis face is not catastrophic decline--unless every reserve estimate going back to the Exxon/Mobil/Chevron/Texaco days was inaccurate--but the transformation of their industry to one that must drill and manage a significantly larger number of smaller (but still very large) fields.  That's where their unexploited reserves are.  I think you can raise legitimate concerns about their ability to do that without financial and technical assistance from outside the country, without disputing the reserves themselves.

In other words, the question we should be asking is not whether they have the oil they claim to have, but whether they have the plans and means of exploiting it when the need arises.

I'm in the middle of reading his book, and just finished the "technical" section. My understanding of the water cut problem is simply that as the water cut goes up, you have to pump out more and more fluid in order to maintain the same level of oil production. Additionally, you have to pump in more and more water in because you have to combat both the loss of reservoir pressure and get higher flow rates out of the same number of wells. There's also infrastructure questions related to where the water comes from, where you send it and how you separate the oil from the water. Also, the higher the water cut, the more you have to start worrying about corrosion of your carbon-steel pipelines. The ex-executive from Halliburton really didn't cover Simmon's points, since the increasing water cut wasn't the only thing he was talking about.
we have every cause to question saudi's reserves, since they gained 100 billion barrels overnight in 1989 without noticable announcements of new discoveries, since they have been pumping nearly 10 mbpd for years and their reserves have not depleted, since they have been promising 11 mbpd for years and have been unable to deliver, and since they now show signs of husbanding their remaining oil by making products with their oil instead of shipping the stuff off for pennies per barrel.

see the table here to see the mysterious overnight doubling of OPEC reserves in the late 80s. and then try to convince me that anyone in their right mind should pay attention to anybody's reserve figures.

I don't dispute that; I've highlighted those figures myself.  However, do the math.  Even if the reserves are only 100 GB, that's still an R/P over 30.  Since 1980 the US has produced nearly as much oil as SA, from a resource base whose R/P was 1/2 to 1/3 as big.

The big "aha" about the Kingdom is not that the oil is about to run out.  It's that we can't rely on them for more than very modest increases, and they've said as much.  Peak or no peak, that suggests that supply won't be able to keep pace with demand within a decade.

here's an article about saudi's planned "massive expansion" of their petrochemical industry, which indicates to me that the saudis are becoming more concerned with husbanding the resources they have left.
Here's an article from the Houston Chronicle today suggesting that the gasoline situation there may not be so bad.  Some quotes:

"Gasoline is flowing back into the Houston area and its main evacution routes just in time for the mass migration home.

"Drivers scouting for gasoline today are reporting success after a little persistence, while service stations, convenience stores and even grocery stores are assuring customers gasoline should arrive anytime."

"Hoping to get a jumpstart on the traffic expected to resume in earnest today, state troopers escorted tanker trunks full of gasoline to stations on Saturday and companies rushed to deliver extra fuel to gasoline-hungry areas overnight."

"The north Houston and Pasadena terminals that supply Shell stations were open again today with enough gasoline to fill up at least 30 tankers with 270,000 gallons of fuel. The tanker drivers have instructions to start with gas-needy I-45, I-10 and Highway 290.

"Exxon Mobil was bringing in tanker trucks from as far away at New Jersey and Illinois. Company officials said they delivered 531,000 gallons of gasoline to 14 retail stores in the Houston area on Saturday, the equivalent of the normal daily demand for the entire Houston market."

It sounds like the Houston metropolitan area is not facing a particularly bad gasoline situation, although the need to suddenly transport half the city's population hundreds of miles would of course strain any infrastructure. But if even Houston is OK, it doesn't sound like other areas of the country should have much to worry about.

The fact that gasoline futures prices are down again today suggests that market traders don't foresee any major supply crunch over the next few weeks and months. It will be interesting to see if TOD readers have a better crystal ball. If you guys keep beating the markets maybe you ought to try your luck, it's not everywhere that you can get rich just by being right.

they opened the market today for only one reason, to drive the price down.  This means the traders, ( who ever showed up) would be shortselling the market from the open.  This is pure politics playing with the economy.  

We have really no data other than a few phone calls from a few oil workers who "don't see much damage".  This is all short term stuff.  Short selling gasoline futures will not create increased supply.

And the only people who I know who would short sell gasoline futures on a Sunday, after a huricain, with little to know information, have very very very deep pockets otherwise they would never take such a risk.  

This market behavior is risky.  If the news turns around, a refinery blows up being restarted, or the damage is far worse than what is reported and known, then prices could turn around fast.  And when that happens, these people who sold short will have to cover their looses by buying back contracts, which is bullish for the price of gasoline.

This appears very political to me, and is a ploy to give people a false sense of security regarding their "sugar", which is gasoline.

This amounts to conspiracy-theory reasoning. Who is this mysterious "they" who were able to open the markets such that prices will only go down? And how did they assure that traders would cooperate?

Suppose that this were happening, that some deep-pocketed groups were selling into the market to drive gas and oil prices down, even though everyone knew that in a week or a month the truth would come out, the shortages would no longer be able to be covered up, and prices would skyrocket. What would happen then?

I'll tell you - everybody and his brother would be in the market, buying. That's what happens when you give money away. People take all you have to give.

Nobody is deep-pocketed enough to move markets in this way, against what everyone (supposedly) knows is the truth. The problem (from "their" perspective) is that anyone in the world can buy these under-priced contracts being pushed for sale, in the expectation of making a sure-fire profit once the shortages appear. And that's not just private individuals, that's every other company in the world which can put its wealth into that market.

Nobody is richer than the whole rest of the world put together. If "they" were really trying to move the market in a way that everyone knew didn't make sense, it wouldn't work, because too many people would show up to take the money that the manipulators are giving away.

Besides, what would be the point? So "they" drive gas prices down today. But if there's a shortage, there's a shortage! No market manipulations are going to change that. The shortage will show up anyway, probably within a few days, if the infrastructure damage is as bad as the reports here indicate. Why would anyone give away enormous sums just to produce a few days of fake good news? Reality is going to catch up to them soon enough.

Honestly, this kind of conspiracy-oriented thinking is not a good way to analyze the situation. There is no evil "they" out there that is trying to manipulate the markets, and even if there were, they certainly aren't doing a very good job of it.

A more likely explanation IMO is that we are getting selective news here. We are hearing only the most negative reports, the refineries in trouble, the rigs that are failing. It's a highly biased presentation. And so this is giving readers here a false impression of how bad the situation is. The markets see it differently; they think that Rita will turn out to have had little effect, and Katrina's cleanup will continue. It's not an unreasonable view! So prices have come down once again to pre-Katrina levels.

No conspiracies necessary; all that is required is the ability to say, maybe I'm wrong, maybe all those people who disagree with me might be right.

Government Intervention in Stock Market is Detailed by New Report, GATA Says

but manipulation cant happen in an energy market, since we're dealing with real substances and shortages thereof?

ever heard of a little houston company called enron, headed by bunnypants' buddy, kennyboy lay?

Sprott Securities is a boutique hedge fund which specializes in metals but also covers energy. They appeal to Canadians who like yellow metal. They have a marketing motive in promoting such stuff...

Conspiracy abounds over the dreaded yellow metal... its all completely pointless even if true. Who cares if Gold is manipulated, I care if WHEAT, MILK, EGGS, MEAT (well, soy, I am a vegetarian) etc are available, not gold which few of the worlds population have in amounts large enough to make it a currency again.

The secret Exchange Stablization Fund, jointly run by the Fed and Treasury, has $50 billion in assets.  The Fed even voted itself the ability to borrow money to buy another $25 billion in foreign exchange if it wants.

Selling short a few energy futures for a loss wouldn't even put the smallest dent in the ESF balance sheet.

bingo and thank you
Halfin, the comment above isn't really talking about a private party, but more or less government backed large institutional players.

They own the printing press, and as such, do not need to worry about certain things like margins requirements or losses.

Anyways, the constant reinforcement and playout of comments regarding not as bad damage (which mostly refer to the Texas City refineries and not to east texas west LA refineries) are very, very premature given how little information is available to energy consumers.  There literally isn't enough information to make confident major decisions on energy plays.

Not to mention, we have no idea what happened to the offshore rigs, and how long energy will be shut in from the GOM.  This is most definitly a sucker move in the markets.

New reports of damaged refineries.

Chevron is assessing offshore oil and natural gas production facilities as weather permits. Initial assessments have revealed that the Typhoon tension leg platform (located in 2,000 feet of water in the Green Canyon area approximately 165 miles south-southwest of New Orleans) was severed from its mooring and suffered severe damage during the storm. The facility has been located and is being secured. Chevron has mobilized appropriate resources to address any environmental concerns. No employees are at risk. Prior to the storm, the company safely evacuated employees and contractors from the U.S. Gulf of Mexico facilities. Decisions on when production can be restarted from the company's other offshore facilities will be made when the post-storm assessments are concluded.

Reports of a gas leak in the proximity of the Henry Hub facility located in southwestern Louisiana were investigated by emergency response personnel. Two separate natural gas releases were located and secured, neither of which was sourced from Chevron's Sabine Pipe Line Company or Henry Hub.

The company also advises that its Houston offices will be closed on Monday, Sept. 26, but will re-open on Tuesday, Sept. 27. However, the company is advising employees who left Houston during the evacuation to follow plans laid out by public officials regarding their attempted return to the city.

[Note: I live in Houston, the Mayor updated his plan and told people that those who work in business that are important to the city's infrastructure should return ASAP. I think this is important.]

Rowan Companies
Rowan Companies reports that, in the aftermath of Hurricane Rita, its jackup rigs Rowan Odessa and Rowan Halifax were not at their pre-storm locations. In addition, the hull of the jackup Rowan Louisiana apparently detached from its legs and is aground offshore Louisiana. The Company was also unable to account for one rig, the Rowan Fort Worth, via a high-altitude aerial survey conducted yesterday.

The Rowan Odessa, Rowan Halifax and Rowan Louisiana were operating under contracts that provided for total revenues of approximately $210,000 per day. The rigs are collectively insured for an amount that exceeds their aggregate carrying value. The Company does not maintain insurance against loss of revenue.

GlobalSantaFe reported that two of its jackup rigs, the GSF Adriatic VII and GSF High Island III, could not be found on their drilling locations during a search by fixed-wing aircraft Sunday. There were no signs of any major damage from Hurricane Rita to the company's other rigs in the Gulf of Mexico.

GlobalSantaFe's fleet in the Gulf of Mexico includes nine jackup rigs, four semisubmersible rigs and one ultra-deepwater drillship, the GSF C.R. Luigs. The drillship relocated before the area was impacted by Hurricane Rita, and all other rigs were safely evacuated in advance of the storm.

The rigs contributed $5.3 million of the company's total $135.3 million of net income for the first six months of 2005.

Transocean Inc
The Deepwater Nautilus, an ultra-deep water state of the art semi-submersible drilling rig, owned by Transocean Inc., broke free while attempting to run from Hurricane Rita and is now adrift in heavy Hurricane Rita seas. According to Transocean spokesman, Guy Cantwell, of the forty-five crewman that were aboard the rig, the final fourteen were safely evacuated late this afternoon. Prior to Hurricane Rita's entrance into the Gulf of Mexico, the rig was undergoing repairs to its mooring system miles south of Cameron, Louisiana. The rig was under tow to "safer" waters heading east when the rig towing bridle broke in heavy Hurricane Rita winds and seas. Transocean is able to monitor the rigs position by using onboard transponders, but will not likely be able to reattach tugs until Rita moves ashore.

ABC Reports:

The government has already agreed to loan or sell 24.2 million barrels of reserve oil to refining companies after Hurricane Katrina.

The Department of Energy said one of the stockpile's four storage sites suffered minor damage and was affected by flooding, and another site was also impacted by flooding after Rita.

A department spokesman on Monday did not know if the damage and flooding would affect oil shipments from the reserve to refineries.

Bush said a significant amount of shut oil refining capacity in Texas and Louisiana will be back on line soon, but urged American motorists to conserve gasoline where possible.