Katrina, Oil and Gasoline
Well, it looks like gasoline might not be going as high as previously thought. Right now, via Bloomberg gasoline for near month delivery is at 222 cents/gallon. Why? Well it looks like the Colonial Pipeline is back online. This is good news as far as getting gasoline out of the New Orleans area. The Capline pipeline also resumed operations on Wednesday as well. The Valero St. Charles refinery has restored power and that a quarter of the workers there have returned. Also, Chevron’s Pascagoula, Miss.refinery has avoided catastrophic damage, but is still offline. From what I’ve read Port Fourchon and the LOOP are also not nearly badly damaged as were feared and the biggest hurdle appears to be getting electrical power restored. In fact, the LOOP restored pumping operations yesterday. And the Plantation pipline is back in operation. Strange that the Oil Drum seems to have missed all of these bits of news.
Another bit of good news the Oil Drum seems to have missed is that the EPA has come out with a limited waiver for 46 states regarding the volatility requirements for unleaded gasoline. In other words, a refinery in that is geared up for conventional gasoline that previously could not sell in areas with boutique blend requirements may now be able too. This will help reduce gasoline volatility.
The electricity situation is daunting though. According to this article 99 lines have been reported down and 104 substations out of service, and that is just the transmission system (high voltage lines). The distribution system is almost assuredly worse off. For example if Mississippi is any indicator, there are an 4,500 poles that need to be replaced in Mississippi.
In short, things are bad in regards to oil shipping, refining and pumping, but the problems may not be as horrible as first thought. Since oil is a global commodity the loss of offshorre production in LA wont have a huge impact on oil prices (oil prices at NYMEX are well under 70/barrel at $67.80 according to Bloomberg). The fact that some of the refineries aren’t as badly damaged as initially feared and that piplines and Port Fourchon and the LOOP are actually starting some aspects of operation all spell limited good news.
Thanks to Victor at Dead Parrots Society for pointing out some of these items.
Update: Just checked at the Entergy website and things are a little less bleak than initially thought. There are only 92 lines down and 99 substations out of service. Further, Entergy has restored power to some 363,000 of their customers.
LONDON – European refiners are sending large volumes of gasoline to the United States after Hurricane Katrina devastated the Gulf Coast, closing refineries and causing shortages, ship brokers said on Thursday.
Basically, it will limit to some degree how high prices can go.
And granted things are still pretty bleak, but not as bleak as the were a day or two ago.
Econbrowser also has a very good summary of some of this including the releasing of oil from the SPR.