September 02, 2005
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.
Posted by Steve at September 2, 2005 09:01 AM | TrackBackHey, no problem. Thanks for trying to keep track of these sorts of things.
Hattiesburg Mississippi has power again. This is important because it is located SE of Collins, MS, which is the site of a pumping station for the Plantation Pipeline.
Aha! Yep, it happened. Collins has electricity and the Plantation Pipeline is back up and running (mostly).
Their equipment was undamaged, so they should be good to go, if they can get product to pump, that is.
Posted by: Victor on September 2, 2005 04:36 PMAnd the Plantation pipline is back in operation. Strange that the Oil Drum seems to have missed all of these bits of news.
Seeing as the Oil Drum is a "Peak Oil" site, maybe they tend to ignore things that don't fit with their doctrine?
Funny, when I pointed this out to the guys at the Oil Drum they got defensive. Thanks for the further update Victor, I'll try to add it to this post and the one at OTB (assuming I can get in).
Posted by: Steve on September 2, 2005 04:53 PMIs "Peak Oil" a doctrine? It doesn't seem to be a theory.
http://www.notesoft.com/dbarchives/forum8/a000043.htm
Our neighbors are stepping up to help. Two stories from Canada. The first:
Pushing back maintenance at refineries as well as pipelines will keep Canada's capacity to supply U.S. markets as large as possible when the supplies are needed most, Stringham said. . . . .In addition to oil and gas, officials are discussing sending Canadian power utility crews to help restore the electricity needed to run Gulf Coast refineries and pipelines.
The second story deals more with aid offered by the Canadians but also notes:
The government of Prime Minister Paul Martin also said it would pump an extra 91,000 barrels per day of extra crude oil to the United States to help overcome fuel shortages.
Also, this story really highlight the international nature, and commodity status, of gasolline, as Canadians are wondering why their price for gasoline is going up after the Katrina disaster:
The storm knocked out or impacted 12 U.S. refineries -- with a capacity to process 2.4-million barrels a day -- out of 114 with a capacity of 15 million barrels a day. In Canada, there are 18 refineries with a capacity of 1.9 million barrels a day.Refineries in the U.S. Gulf Coast process crude for markets across the continent.
If there was ever a compelling reason to use the post-KELO authority of eminent domain, I think regionally diversifying refineries has to be near the top of the list.
*** Note their price of C$4.70/gal (US$3.94/gal) with $31,500 GDP/cap (ppp) compared to our $40,100 GDP/cap (ppp) - Source CIA Factbook
I'd consider oil refineries as US strategic assets and their clustering in the Gulf to be a pressure point, as events have shown. We certainly have slack in the affordability of gasoline that can be used to secure, and diversify, future production.
Posted by: TangoMan on September 3, 2005 01:07 AMOff 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).
Posted by: Dave Schuler on September 4, 2005 07:47 AMAs far as waiving the EPA fuel regs goes, it's too short of a duration. It also showed where the EPA had it head stuck ... They initially waived the regs for only the gulf states affected by Katrina.
Then, later the same day they expanded those waivers nationwide.
... but still only until Sept. 15th.
We need long-term temporary wiavers to truly calm the market ... and the public.
Posted by: Mel on September 5, 2005 05:09 PM