30 August 2005

Why This Matters: Katrina and Peak Oil

My heart goes out to the people of the Gulf Coast. Seeing the devastation of places you've been and feeling the hopelessness of the situation is indescribable. It will be months and months before everything is even functional in that part of the world. Screw you, Katrina! And the hurricane season is only half over? I wonder if this is another sign of the things to come for all of us as Mother Nature gives us all a big 'Eff You'?

And to think that our problems in the short-term are only starting....

from www.theoildrum.com:

Posted by Prof. Goose in Supply/Production
Mon Aug 29 at 8:43 PM EST
Katrina IS a big deal today and will be for weeks to come.
Why? Because Katrina will have disrupted Gulf production, refining, and storage of petroleum for an uncertain amount of time. We have probably lost at least 1mbpd of production, if not more, for a significant period of time. We use 20mbpd in the US. That means either the US cuts consumption by at least five percent or demand will push prices upwards, and dramatically.

You see, with supply and demand balanced on a knife's edge as it is because of "peak oil," this scenario could lead to huge amounts of volatilty in the oil markets for weeks to come. There is simply no more extra oil (except maybe the SPR, but that petroleum is problematic as it is yet to be refined, and refineries are already at capacity if they survived the storm, Chuck Schumer, you idiot.) we can call upon to put into the system.

With supply and demand balanced as it is (and with demand only growing over time from places like China and India), it only takes one "something" (terror, weather, malevolent world politician) to disrupt this gently balanced system.

This is what Goldman Sachs was saying six months ago when they introduced the idea of a $105/bbl superspike. NB, I am not saying this is the "superspike." However, if this is an event that really disrupts supply it could mean a terribly volatile market with a price spike...(and yes, that $105/bbl number probably equals somewhere around $4/gal or more for gas or even worse, a shortage of supply because of systemic problems).

................................

How high do you think the oil price could potentially get? I'm sure we'll get a good indication by the end of the week.

6 comments:

Mrs The Experience said...

I just think it's neat that the oil reserves are kept in underground caverns along the Gulf Coast. I imagine something like Fraggle Rock. Of course, the Fraggles in this particular situation are all harbingers of world devastation and immediate poverty. Wah waaaaah.

Reid Dalgleish said...

Dance your cares away
Worries for another day
Let the music play
Down at Fraggle Rock

Mrs The Experience said...

The Government's not ok
Excessive prices we'll pay
For fuel, every day
Down at Fraggle Rock

Jeff said...

Hey I remember the Fraggles. Those undergrond taverns are actually salt domes that are hollow. We store Natural gas in these hollow salt domes down east.

Reid Dalgleish said...

I thought NG was a gas, not a liquid? Doesn't it have to be stored under pressure?

Reid Dalgleish said...

Nice ditty Sara!