<News Deposit/Open Thread The Oil Drum Shepherd Bliss: Hurricane Katrina, New Orleans and Peak Oil>

29 comments on Yergin: The Katrina Crisis, a hurricane produces an integrated energy disaster

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Fire Temple on September 3, 2005 - 12:36pm Permalink | Subthread | Comments top
I like the term "integrated energy crisis" in the opening paragraph.  But despite this insight, Yergin goes on to suggest that with the combination of SPR and "market forces" the crisis will be short and relatively mild.  He does not elaborate on the impact on natural gas prices this winter.  

Regarding "market forces," the assumption is that with high U.S. jet fuel and gasoline prices, the European and Latin American refiners will sell their fuels in the U.S. instead of at home where margins are less.  (Presumably the differentiating fuel specs will be waived during this period.)  Perhaps that would be the case in the ideal capitalist world.  But no democratically elected leader (as in most Latin America today) will risk raising fuel prices at home for a good financial quarter at their state oil company.  We may see some more gasoline from Europe (where the gasoline demand is falling in favor of diesel), but certainly no middle distillates or fuel oil.

So however you look at it, this is going to be a rough winter.

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louGrinzo on September 3, 2005 - 1:12pm Permalink | Subthread | Parent | Comments top
Without diving into the details of Yergin's comments (because I haven't read them yet), let me add one observation: "Crisis" is in the eye of the beholder.

Widespread gasoline shortages that last more than a day or two would create a crisis.  But what about gasoline in the $4 range (just slightly higher than the US price as I type this), but with only a very few, localized outages?  If you're a lower-income person, then the higher gasoline price could indeed be a very sizable and immediate burden, but for the economy overall, I don't think it qualifies as a crisis.

What if gasoline hit $6/gallon, and stayed there until late 2006?  I would probably consider that a crisis, even without shortages.

My point is that it's ferociously difficult to decide what is and isn't an "energy crisis", and for each of us it's a function of several factors (availability, longevity of the higher price, anxiety produced by uncertainty about future prices, etc.).  

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JLA on September 3, 2005 - 2:26pm Permalink | Subthread | Parent | Comments top
Lou,
My sense is that the prices we are seeing now (>$3) are ample to produce a good old-fashioned energy shock.  Even without the drag on consumer spending (which is substantial), firms from many sectors will be reeling at these prices--especially given how quickly we have gotten here, leaving little time for adjustment.  

That, combined with the heating fuel/natural gas crisis we are sleepwalking into, qualifies as a crisis in my book.  

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JLA on September 3, 2005 - 2:47pm Permalink | Subthread | Parent | Comments top
A bit optimistic about the long term, but a good article from the Post:

"Storm's Economic Shock, Job Losses Likely to Rival Worst
Hurricane Katrina, by forcing an exodus of workers and families from New Orleans and surrounding areas, appears likely to rank alongside Sept. 11, 2001, and the Arab oil embargo of 1973 as one of the nation's most serious and sudden economic shocks -- particularly in terms of job losses -- in recent memory."

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/02/AR2005090202468.html

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Donal on September 3, 2005 - 6:51pm Permalink | Subthread | Parent | Comments top
It's a recession when your neighbor can't afford to buy gas or heat his home; it's a depression when you can't afford to buy gas or heat your home.
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29 comments on Yergin: The Katrina Crisis, a hurricane produces an integrated energy disaster

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