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Monday, August 29, 2005

Oil Storm Deja Vu

Back in June, FX aired a docu-drama entitled, “Oil Storm.” The movie was sub-titled, 1 million barrels of oil gone. The movie began with a hurricane taking out Port Fourchon, the major entry point for oil into the United States. Circa, late summer, 2005. Eerily prophetic.

The US government ends up tapping the Strategic Petroleum Reserve to make up for the shortfall. We call on the Saudis to bail us out, but the radical Islamic fundies put the kibosh on that maneuver. Russia finally comes to our aid with a big oil shipment. China initially outbids us while the oil is in transit, until we up the bid and invest heavily in Russian oil infrastructure. We all live somewhat happily ever after.

On the LA 1 Coaltion website they state:

Louisiana’s southernmost port is Port Fourchon, strategically located in the central Gulf region where it serves as a focal point of deepwater oil and gas activities...Analysts predict that losing access to Port Fourchon could choke our national energy supply, sending gas prices to over $3 per gallon.”

Before hurricane Katrina was forever etched into our memory, the US was suffering from an oil refinery capacity problem; one of the main causes of the recent run-up in oil and gasoline prices. Refinery capacity, therefore, is still a problem. Katrina will just exacerbate it to new heights.

The Louisiana Offshore Oil Port (LOOP), the first and only offshore oil terminal operating in the United States capable of off-loading the huge, deep draft supertankers, is located less than 20 miles south of Port Fourchon in the Gulf of Mexico. LOOP connects to over 30 percent of this nation’s refining capacity, some of which is in St. Bernard’s parish near New Orleans--almost directly in the path of the hurricane. The homes in St. Bernard's parish are currently under water.

The world has recently been suffering from “infrastructure peak,” as a result of increasing demand, a lack of refining capacity, and other bottlenecks; not to mention, the peaking of light sweet crude oil. Many of the refineries are just not able to handle the heavier sour crude grades that are now becoming an ever-increasing share of global oil production.

Oil has now breached $70/barrel and is destined to possibly soar when the reports on the damage to production facilities in the Gulf come in.

Will we call on the Saudis and OPEC to increase production? Will we tap the SPR? Will gas be over $3 by Labor Day?

As Paul Harvey would say, “stand by for news!


Aaron Dunlap said...

Well it looks like you were a little off on your per gallon prediction huh?


Monte L. Myers said...

Trying not to be such a "doomer."

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