Now for the Bad Katrina News

The other day I posted on some of the good news coming out of the New Orleans area in regards to oil and gasoline. Prof. Hamilton also notes some bad news as well. It is important to look at all these things to try and get a clear picture of the situation in New Orleans in regards to oil and gasoline.

First off Prof. Hamilton points to the Oil Drum’s noting the complete loss of 30 drilling rigs. Also the slow rate at which oil production is coming back on line. Now this is bad news for crude oil markets in that it makes the market a little less competitive and hence prices a little bit higher. Also, the market is likely to be more volatile. With reduced production in the Gulf of Mexico, the market is a little bit more dependent on oil out of places like the Middle East and the tensions there make the market volatile.

Prof. Hamilton also notes the problems and his feelings of frustration with New Orleans itself.

Although the logistical problems with fuel supply are amenable to rational plans for coping, I can’t help but feel frustrated by the slow progress within the city of New Orleans itself. I’m haunted by the words of Kash at Angry Bear: “These do not sound like stories written about the United States.” And of course, the stories themselves are indisputably haunting.

This could also be a very big problem as well. First off many of the workers at the refineries and pipelines probably live in the area and have concerns for their homes and families. As I noted yesterday the electrical situation is very bad and that is a big hurdle facing the refineries and pipelines as well as the LOOP. Getting power back in the area is going to be a long time in coming, IMO. I don’t know how things are prioritized there, but I can imagine that getting power back to important things like hospitals and so forth is going to be high on the list. And then the anarchy that New Orleans has descended into is probably going to make and rebuilding efforts take longer.

FILED UNDER: Economics and Business, Natural Disasters,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Herb says:

    I don’t think the oil companies is in need of any help from you or this Prof.Hamilton to think of another excuse to raise the price of crude or gasoline.

    Isn’t it strange that those in the energy business keep trying to tell us that the price of energy is “just fine”. Could it be that these energy folks are just trying to CYA and their jobs at the expense of every American.

    With guys like Hamilton teaching in our colleges and universities, It is no wonder that we see a lot of people with degrees that don’t have an ounce of common sense and little concern about America and Americans.

    Time to get the knife out

  2. KevinM says:

    Their power problems may be ameliorated by the fact that at least the larger plants will have captive cogen facilities.

  3. Steve Verdon says:

    I don’t think the oil companies is in need of any help from you or this Prof.Hamilton to think of another excuse to raise the price of crude or gasoline.

    Soooo…the laws of supply and demand are to suspend operation simply because you are retired Herb and on a fixed income? Increase demand prices go up. Decrease supply, prices go up. Reverse these effects and prices go down. It was a few years ago when gasoline prices were very, very low.

    Isn’t it strange that those in the energy business keep trying to tell us that the price of energy is “just fine”.

    What in the Hell are you talking about? I didn’t say it was “just fine”, that is a blatant lie. Same for Prof. Hamilton. In fact, both he and I have noted that the high energy prices, the tightening Fed policy, and the potential bursting of the housing bubble could send the economy into recession. Only a drunkard or dishonest person would conclude that prices are “just fine”.

    With guys like Hamilton teaching in our colleges and universities, It is no wonder that we see a lot of people with degrees that don’t have an ounce of common sense and little concern about America and Americans.

    You’ve written some dumb things Herb, but this has to take the cake. You have confused informative posts such as Prof. Hamilton’s for posts that endorse these high prices. I’m sure if it were up to Prof. Hamilton he’d rather there were lots of oil, cheap gasoline, and a poney in your garage Herb. As it is, there isn’t, it is expensive, and there isn’t. Tough luck Herb, but whining about it wont help one bit.

  4. Dave Schuler says:

    Off topic: Say, Steve, is the situation with the levees on the Mississippi a variant of the “tragedy of the commons” scenario? The Army Corps of Engineers has statutory responsibility for flood control on the Mississippi and, consequently, the function has already been nationalized. Neither conservatives nor liberals, Democrats nor Republicans have any real interest in giving them enough funding to do the job (as recently as last spring the NYT had an editorial opposing additional funding for the ACE). [same comment chez vous]