The upcoming election in Mexico will be one to watch very closely as Lopez Obrador looks unbeatable. Some background on what's been happening is available here, http://www.narconews.com/Issue35/article1173.html, and follow up articles on the massive protest marches, here http://www.narconews.com/Issue37/article1273.html and here http://narcosphere.narconews.com/story/2005/4/29/125547/063

For a different view of things happening in Venezuela, try this, http://www.venezuelanalysis.com/

I see various versions of Autarky the Open Door will try to keep from occurring but failing. As was said, we live in interesting times.

>fourth place is Venezuela, which now counts Russia and China as larger customers.

??

Russia produces much more oil then Venezuela. Please think before making statements.

Mexico, Venezuela, and Brazil should be looking at a sustainable energy protocol which would entail significantly reduced oil exports in favor of long term internal consumption and development. This is a process which is underway. They may as well be proactive before depletion does it for them.

A small factoid or two...

It will not even take terrorism or anything political. The climate change issue, with more heat trapping going on in the tropics, sets the stage.

I work in the domestic oil industry. We routinely evacuate offshore platforms when a hurricane enters the Gulf of Mexico. Deepwater work must cease quickly, because the rigs are dynamically moored. Shallow rigs are left in place as are platforms, but the production is shut-in and personnel evacuated.

Last year, we had 15 platforms that were damaged and required repair. The industry had over 75 total damaged, two had drilling rigs collapse on top of them. These repairs sometimes run months due to personnel and equipment shortages in our industry.

The same holds true for Mexico, Trinidad, Brazil and all of Southeast Asia - when hurricanes blow, the offshore oilfields shut down. Then they have to caal the same companies we do and get them repaired. You can watch prices rise according to hurricane activity in these areas already. As supplies become constricted, these shut-ins will trigger price spikes even more significant than seen in recent years.

Similarly, our refining capacity is at maximum volume, even with surplus oil on-hand. As the pressure mounts to get more product out of these plants, it increases the likelihood of a major explosive accident. And the pressure is ON these plants, as they have now become much more profitable with higher oil prices, and their shareholders and managers want to cash in now, while the cashing in is good.

Not to mention the age of these refining plants.....

Another item people are not talking about is the incredibly decrepit condition of many of our gas pipelines in this country. There are many over 50 years old, that have been spot-patched innumerable times. Oil flow lines which take crude to gathering facilities to send to refineries are in even worse shape in many cases. We are constantly patching them or being forced to shut down and replace them.

Don't forget that the oil industry shrunk from around 2,000,000 workers to around 750,000 over the last few decades. There are usually 2 or 3 companies supplying any given service domestically, fewer internationally. We do not have enough crews for existing land rigs and we are at 100% usage offshore. Offshore, they are having trouble crewing even the support boats - if you can breathe, you can get work on a boat down here. Service companies are in the same shape - people shortages. Average age of our work force is around 50...

But with all the activity, we are royally hosed when anything major happens. We simply don't have enough people and equipment to do more than we are right now. So if things break, it often means we have to wait a while before we can fix it. And that means aggravated declines that have to be made-up from imports.

Running any kind of a chemical plant at 100% capacity usually means that you're taking a pass on regular maintenance. You can do this for a while, but eventually it catches up with you, especially in an environment like the seacoast.

and Aaron, that's straight out of the ASPO report I cite.

and that's WHO we get our oil from. Russia is importing oil from Venezuela, not a lot, but some.

Your tone is not welcome here, especially when your criticism is unfounded. If you have a problem with the ASPO cite, then say it as such.

Tim -

You mean they have refineries somewhere else besides on the seacoast?

It's not as bad as it was in the 1960's. Most of the corrode?able (is that even a word?) items have been replaced by stainless or other stuff to eliminate critical failures. But this is yet another reason that companies are extremely reluctant to refine - it is like building a reactor in terms of materials and QC...

J--Yes, it's a word. I know a poster on another board who's been in oil 40 years who provided a great breakdown on the typical R&M done at refineries during Spring, how it relates to oil demand, and the demand for tankers at that time. Charts for VLCC earnings show this very well. He made the points that few domestic refiners are capable of handling sour crude, which will become an ever greater fraction of oil extracted, and that the industry made a conscious decision 20+ years ago now to outsource refining because it was cheaper to have the finished products delivered than produced in the USA (something like 11% of our gasoline is imported).

As to weather related disruption, there's great concern about the rapid loss of wetlands in the Louisiana penninsula--they act as a storm buffer. Four hurricanes just missed the prime oil and gas region between New Orleans and Houston, as I'm sure you remember. Might you speculate for us on what just one of those would do to enegy supplies if it made landfall in the gas and oil patch?

I think a refinery directly in the path of a hurricane would probably be shut down for safety's sake. The construction specs of the columns, crackers, etc. was usually done to withstand at least 100 mph winds, so with a Category 5 there might be some damage to the main units. I would guess that there would be a fair amount of damage to the electrical systems and to the instrumentation, caused mainly by the flooding. It would probably be down for quite a while.

"Now, think about the pricing power of terrorists or even countries willing to play hard core oil politics (hat tip on the last one to Santos) "

Just in case you didn't know this - I believe the 1970's article you linked to from Harpers about seizing Saudi Arabia's oil was actually written by Henry Kissinger (using a psuedonym for obvious reasons).

karlof -

It wouldn't be much worse than any typical big hurricane. Most of the fields on land are old or in decline. Many are strippers. We are spending more money plugging and abandoning them than anything else. It's the offshore where we have big production right now, but the decline curves there are very rapid at the rates we must sustain to pay out projects in a reasonable time for shareholders.

The biggest loss would be the marsh literally washing out to sea....

BTW -

The Louisiana marsh is already severely damaged. Many locations where we used to be able to move a land rig onto are now under water. This means we must permit for wetlands, get permission to dredge a passage to the location, use a barge rig instead of a land rig, and then remediate the site.

What does all that mean? Well, drilling with a land rig costs $15,000 per day; drilling with a barge rig costs &30,000 per day; remediating a land site costs $100,000; remediating a wetland costs $275,000. This price differential to drill a well determines whether or not it is going to be economical. To make it work, oil prices must rise even more before many projects will produce positive cash flow.

Most of the time, our remediation in the marsh actually makes the area around the well better than we found it... There really aren't too many people actually living in the marsh. But it is a very significant part of the local ecology. Our people live and fish and hunt there too, and thus we try to leave things better than we found them.

But FYI - Louisian coastal marshes replenish themselves with annual flooding. Since the installation of the Morganza Spillway by the ACOE, the Mississippi hasn't been allowed to flood the Atchafalaya Basin. THAT is the single biggest reason the marsh is struggling today. There is no new sediment influx to maintain the level of the marsh bottom. When storms hit, they remove sediments which are not being allowed to replace themselves by the ACOE. Thus we get salt water encroachment.