Can we really relax?

Well it's certainly a creative way of solving a couple of problems.  Apparently there is some suggestion out there that the excess inventory of recreational vehicles be sent to the Hurricane zone, to act as temporary housing.  (Which would also get them out of use as major gas users perhaps?)  From Reuters
Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said he had heard reports that recreational vehicle dealerships in his state were being told to transfer their gasoline-guzzling inventories to the federal government. "I would hope that before we buy up all the Winnebagos in America and send them to the Gulf Coast (for temporary housing) that we would be thinking about the cost of that and ... whether that's the best way to proceed," Gregg said on the Senate floor.
For those of us fortunate enough to have escaped that disaster, the DoE is pointing out that prices will be considerably higher this winter, but that have also explained that the 30 mb release from the SPR will be a sale, and on top of the loans.  Reuters
The Bush administration has loaned some 12.6 million barrels of crude from the nation's emergency oil stockpile to six refiners, including Exxon Mobil.
The Energy Department is also accepting bids for 30 million barrels of crude oil from energy companies that want to buy oil directly from the government. President George W. Bush ordered the sale from the Strategic Petroleum Reserve as part of a massive 60 million barrel release of crude and gasoline from the United States and other member nations of the International Energy Agency.
Even though the major Colonial and Plantation pipelines that supply the East Coast with gasoline are running again, it will still be difficult to provide them with gasoline if major oil refineries that make the motor fuel aren't operating, the EIA said.
It is going to be hard to tell the overall effects, since the increase in prices, certainly around here, has had a salutary effect on the discretionary driving that folk are doing.  This seems to be reflected in the immediate reduction in demand. From Bloomberg
Crude oil supplies dropped 6.5 million barrels to 315 million last week, the Energy Department reported today. Stockpiles were expected to fall 7.7 million barrels, according to a Bloomberg survey. Members of the International Energy Agency have agreed to release about 2 million barrels of oil and petroleum products a day to ease shortages. Half of the barrels will come from the U.S. Strategic Petroleum Reserve.
``Crude supplies were down but nowhere near as much as they were expected to be,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``We are going to be getting SPR oil and imports so crude-oil inventories will be in good shape.''
I remain bemused that with the loss of 1 mbd of Gulf production plus the losses in natural gas, that we are continually being reassured that there is "no problem."  Is this going to be another one of those "surprises" that "no-one saw coming", when we run into problems later in the winter, or early next year?

Technorati Tags: peak oil, oil, Katrina,

I feel better already. What amazes me about the numbers that are discussed, is that there is usually no context. Countries A-Z have freed up 60 million barrels blah, blah, blah, but no information on how much we use, how much refinery capacity is or is not available, or over what period of time we'll get those 60 million. It may be a symptom of societal discomfort with numbers, especially big ones. After all, 60 million is a lot! Right? Well it is isn't it?
Hybrid RVs anyone?
Pique Oil
I agree --  I think there will be another oil crisis around November, when people realize that the production taken out by Katrina wasn't really replaced.  

According to today's Los Angeles Times, "the Energy Department predicted that overall U.S. oil and gasoline production would return to pre-hurricane levels by December."  The reporter, James Peltz, saw no contradiction when he wrote in the very same article that no one really knows the extent of the damage to the Gulf oil pipelines, etc.

I keep wondering what it will take to make people wake up about this.  Except for a few people who are already in the Peak Oil subculture, everyone else is too busy or too apathetic to care.  I also wonder how many people have the time to critically read the newspaper articles, instead of just skimming the optimistic headlines.

While I personally think it's too soon to relax, I think that there's a growing feeling that we'll have price fluctuations but no outright shortages.  People don't like unpredictable prices, but fuel shortages are the monster under our beds.  (Yes, this is a classist view; for someone who can barely afford $3 gasoline to get to work, a rise to $3.50 or $4 would be extremely painful.)

My biggest concern right now is that gasoline prices easing a little could tempt consumers to assume that the worst is over and prices will "be back to normal soon" (gasoline at around $2).  Probably the best indicator of mass consumer sentiment will be the level and mix of car sales for the rest of 2005.  If we see very low MPG vehicles rebound, even with gasoline above $2.80, then it's a bad sign and right back to square one.  If people remain cautious, buy fewer cars overall, and then favor the higher MPG models for the ones they do buy, we can conclude that either people are scared spitless or they're starting to get the message about oil.  (This assumes no major change in other factors influencing car sales, obviously.)

I've said it before, and I'll say it many more times: Look out your window--this is what interesting times looks like.

I came across a journal article a few days ago that listed findings of different researchers on the elasticity of vehicle miles traveled relative to gasoline prices.  I'm out of town this weekend, but maybe I'll post it in an open thread or another appropriate location next week.  Folks speculate on this over here all the time, but there is research out there that can inform the discussion.  

Speaking of speculation, I suspect that the key -- as you imply -- is whether the prices are perceived as temporary or permanent.  If they're temporary, then the "employee discount" on that F-250 or Expedition may not sound that bad.  

I've been looking for this type of information. I've seen some articles, but nothing that compelling. I believe you are right about the perception of temporary vs. permanent price increases.
I've been looking as some such papers today. What I haven't found yet is anything that distinguishes between the effect of prices on discretionary trips, and non-discretionary trips (ie when are miles traveled dropping because economic activity is being reduced for the drivers, and when are they just saving miles without otherwise affecting their economic behavior).
The well-to-do might accept expensive gasoline, but heating those McMansions this winter is gonna hurt.  
Besides being an energy / urban planning geek, I also happen to be a college football nut.  I haven't made it to any games yet, but I'm curious to see what happens to the RV count at games this year.  I wonder whether my Prius will now be the height of tailgate fashion rather than the behemoth RVs?
I know "priority" season tickets to our local school cost a $3,500 donation.  A few gallons of diesel to get to the half dozen home games probably can't compare...
I'm wondering if anyone else caught today's shut-in statistics at  It seems that there's actually more oil shut-in today than there was yesterday; 60.12% as opposed to 57.37% yesterday.

Also, they've stopped reporting the 'good news' of production improvement.  No surprise there.

The data that I have look like this:

Oil shut-in:  9/5 - 69.57%, 9/6 - 58.02%, 9/7 - 57.37%, 9/8 - 60.12%

Gas shut-in:  9/5 - 54.13%, 9/6 - 41.60%, 9/7 - 40.36%, 9/8 - 40.20%

I just moved this out front Charles...good catch.
I think over the next few weeks we will see more conservation going on for those that have alternatives. I am hearing a lot of complaints about gas prices these days. Hopefully we can get rid of some of the low hanging fruit in conservation efforts sooner and more orderly as the price mechanism starts kicking in. But of course, here in NYC, we have more alternatives than most areas.
If you shop, you can pick up a used Prius for between $12,000 and $16,000. That's basically the same cost as most of the newer but used guzzlers. I'm just wondering why there are used Prius's and Civic Hybrids and Insights available?? I would think that people would have snapped them up if things were that painful. Assuming 17MPG, $3.07 per gallon gas and a $300 a month note, a typical used guzzler would cost you well over $3800 per year to own and operate. A used hybrid would cost about $1100 a year to own and operate.

Even a junior high kid can understand this math!!

Interesting idea, but I was looking at :

Q:What cars can be converted?
A: At the moment, only 2004-2006 Priuses. Older "Classic" Priuses lack the low-speed electric-only mode and the battery storage space that makes this possible. Honda Insight, Civic and Accord use an entirely different design: the electric motor never runs without the gasoline engine running at the same time. Other hybrids, including Ford Escape, Toyota Highlander and Lexus 400H, are possible future candidates.

I'd have a hard time believing that many other people would care, but it might dissuade me.

No need to worry.  I heard Sean Hannity talking to someone in the federal goverment on the way home from work stating that "there is the same amount of oil reserves in the Gulf of Mexico that there are in Saudi Arabia, there is just too much "red tape" in the form of government regulation that we are unable to tap into it.

I think that it was the secretary of energy, who barely corrected him by saying our reserves "are not quite as large as Saudi Arabia's"

I think what he meant to say what that they are nowhere near Saudi Arabia's.

I wish that I had the audio.  Hannity truly believes that our dependence on the foreign oil can be solved if we just start drilling every place in America that oil has been detected.  Off Cali, more in the GOM, off Florida, and in ANWR.

This is why I keep telling my environmental buddies to call the right bluff on drilling. What if we just said "go ahead and drill anywhere, no red tape" - how much could we produce? Maybe another 1mbd in 10 years at the most. That wouldn't even come close to even stemming the decline that we have from older fields, forget about replacing Saudi Arabia. And we would decimate our environmental treasures at the same time.

The right-wingers just like to throw out stupid generalizations that ending regulations will somehow defy the laws of physics...

Hannity is a wing-nut of the first order (right up there with Limbaugh), the complete antithesis of reason, science, objectivity. If you are an investor or speculator, fade whatever he says.  If the Secretary of Energy says the Gulf of Mexico reserves are slightly lower than Saudi Arabia's, then Saudi peaked years ago and we are in deep, deep doodoo.
I think that the loss of Natural Gas is going to be you major problem by the end of your winter.  This is from an interview with Howard Kunstler on Global Public Media:

"     Every year there's what's called a summer injection season. When houses are not being heated, the gas companies all over North America get gas out of the ground, and they put it into storage in certain places in the ground at the heads of the pipeline network. The natural gas of America runs all around the United States in a pipeline network (it doesn't run around in trucks, although a little of it runs around in the form of propane, but most of the natural gas we use is methane, and it runs around through a pipeline network, so when the winter heating season comes, all that gas in storage is released and starts moving around.

    Well, in March of 2003, we ran very low on stored gas from the previous injection season, and the pressure started to go down in the regional trunk lines of that pipeline network, and we had never been in this situation before, where the pressure had gone so low that the furnaces have gone out as a result. It's never really happened on a mass basis, so the specter was that if the gas pressure got that low and the furnaces went out all over America, or lets say all over a region, such as the New York-Connecticut metropolitan region, then some of the furnaces would restart automatically, because the newer furnaces do that, but a certain percentage of them wouldn't, and when the gas pressure returns, you'd have this potential for exploding furnaces, with gas being released but no pilot light on, and that raised the specter of what is the power company going to do? Are they going to send technicians around to every building in the region to check every furnace? They'd need thousands and thousands more employees to do it, so we had this unprecedented situation that nobody knew how it was going to play out. As it happened, the pressure never got that low that furnaces went out, but believe me, for a while they were very worried about it, and it could happen again."

The full interview can be found at

This summer injection season must have been seriously affected by the shut in gas from the Gulf.  If there was only just enough gas the last couple of years then what will happen this year?

One would hope the 'authorities' would be aware of this and ready for that situation in the future.  Lawsuits would be flying like the snow in Minnesota otherwise.

Kuntsler has just written about the NOLA catastrophe, in which he says:

Fully half the houses in America heat with natural gas. The gas supply was extremely tenuous even before the Hurricane struck. A great deal of it comes out wells in the Gulf of Mexico -- because we have depleted so many of our land-based wells. Natural gas sold for $3 a unit (1000 cubic feet) in 2003. The price is now around $12. Nearly half of that growth is just since the previous heating season. Imagine your heating bill doubling in a year. It could go up beyond $16 before the coming season is over. There are reports that Hurricane Katrina may have damaged three natural gas processing facilities on the Gulf Coast with a combined capacity of almost 8 percent of total national production.

Kunstler has made a living scaring folks in the past (Y2K especially, here he was almost totally wrong), and has now joined the Peak Oil wagon train (ain't a band wagon yet, give it time) from which he may get rich.  I do believe this time, as compared with Y2K, he's got it right.

Waitaminnit. We're selling oil from the SPR? Unless prices go back down, it will cost more to replace that oil than we get by selling it.

Is there any way this can be construed as a good idea? Or is it just a way of exporting problems into the future, so they land on the next administration?


The oil is no sold but loaned.  From Wikepedia: "Note: Loans are made on a case-by-case basis to alleviate supply disruptions. Once conditions return to normal, the loan is returned to the SPR with some interest as oil."

The interest is usually between 2-5% and the contract term is usually about 6 months.

From the article, it appears that there is a loan of 12.6 and a sale of up to 30.