Katrina and the Cost of Gasoline/Oil
Well, if you thought that gasoline prices were high now, just wait a couple of days. From the sounds of it Katrina has really done quite a number on the oil production in the gulf, and the oil refining in New Orleans area. This is like getting shot in the gut and the head. Even if Bush releases oil from the Strategic Patroleum Reserve it will likely have little impact. Why? Well there aren’t that many refineries and quite a few of them are located in Louisiana. In looking at a map at goolge.com my quick research tells me these refineries are probably down and will be for some time.
|Motiva Enterprises, LLC||220,000||Norco|
|Valero St. Charles Refinery||155,160||Norco|
|St. Rose Refining (Shell)||55,000||St. Rose|
|Chalmette Refining, LLC||182,500||Chalmette|
In other words just under a million barrels/day of refining capacity has been taken off line. Add in that several off shore gulf rigs are likely also off line and it means that gasoline/oil prices are going to go up. Over at the Oil Drum Professor Goose notes that the U.S. uses about 20 million barrels per day (mbpd). Thus about 5% of the nations entire refining capacity just went away for an indeterminant amount of time.
This New York Times article is also chuck full of information. Such as that there are 4,000 drilling platforms in that region connected by 33,000 miles of underwater pipelines. The gulf region produces about 27% of the nations oil and 20% of the natural gas. Also oil production in the region was reduced by 92%.
So what about the Strategic Petroleum Reserve (SPR)? Not much. After all, it isn’t just the oil is going to be in short supply but also the refineries necessary to turn the oil in the SPR into gasoline. Valero is indicating it could be two weeks before its operations are back online. The St. Charles refinery noted above was under three feet of water and sustained minor damage to its cooling tower.
President Bush demonstrates a poor grasp of the situation,
“You just got to understand that the situation we got ourselves into, dependency on foreign sources of oil, took a while to get there, and it’s going to take a while to become less dependent,” Mr. Bush said.
As I’ve noted several times in this post, it isn’t simply the dependency on foreign oil (in fact that is a minor part of the picture which I’ll explain a bit more further down). Another big aspect of the problem is the lack of excess capacity in refineries. That part of the oil/gasoline supply line is also very tight. A slight problem there such as a Hurricane tearing up Louisiana.
As for the dependency on foreign oil that is “talking points/rhetorical bullsh*t”. Suppose we weren’t dependent on foreign oil and that we still obtained 27% of our oil from the Gulf region and there was a big hurricane. Oil production would still decrease and prices would go up. Somebody needs to inform Bush that we are talking about a world wide market for oil and that statements like the one above may sound good to the uninitiated on this issue, but to those who understand the issue he looks like a fool.
Well, at any rate I hope you weren’t planning on taking the RV out for the long weekend. Or if you do, I recommend driving it to the end of driveway and setting up camp there.