The Oil Drum | More on Rig Damage and Structural Integrity

24 comments on More on Rig Damage and Structural Integrity

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Mad Oilman on October 1, 2005 - 2:09am

A. Incorrect. Once the pipelines are surveyed production will come back on line. 6 months (personal opinion).

B. See above.

C. Production growth, most likely. But given inevitable price increases in a tight market, you may be surprised at decreased demand over this same period. China and Indonesia are already suffering immense pain by subsidizing domestic fuels. Iran s doing the same, but with natural gas. These countries are taking huge treasury hits as they are not allowing the market to dictate prices. They are doing everything to not deal with demand, and they are leaving a ton of money on the table

D. Increased prices will cut demand. We're already seeing it in the domestic gasoline market. If we have even a moderately cold winter, you will see it more when heating bills need to be paid. Demand will drop significantly.

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Davidh on October 1, 2005 - 4:49am

unless you charge it to your credit card and don't pay the bill.

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ab3 on October 1, 2005 - 10:37am

I agree that we're going to start seeing some real demand reduction in the coming months as the price of gasoline continues to rise. I'm not so sure if we can get enough of it to keep us out of serious economic difficulty though.

Since you work in the oil industry and know what's going on, I'd love to hear why you're so optimistic about getting full production from the GOM within 6 months and why you see that prospects for production growth are good too. I hope you're right.

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patents on October 1, 2005 - 11:36am

According to the most recent EIA figures on their "This Week in Petroleum" web page, the demand for gasoline on 9/23 ROSE over 9/16 and it returning to the year ago value.

So, this seems to indicate, if any government report is reliable these days, that demand has not slowed despite a slight the increase in the week over week price of gasoline.

It is hard for me to imagine that society as a whole in this country is smart enought to rapidly change their lifestyle considering all the happy talk that they see and hear from their leaders. As long as banks still extend credit, gas will be purchased regardless of price. The papers were full of stories about the huricanes doing less damage than thought and stories like Bush urging conservation are buried. Has anyone seen any increase in ads for public transportation or anything to start conditioning the populace to conserve?

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DonRobbie on October 1, 2005 - 3:04pm

I would guess that as gas prices fell post Katrina and per Rita demand rose. Also Right after Katrina there was more panic buying of gas which caused a rapid spike in price and spot shortages. Now (rightly or wrongly) there is not such a panic and the Rita Spike has played out over a week or so rather than a couple days.

One thing I have noticed is this time Gas and Diesel prices have moved up together with Diesel climbing back above Gas(here in Indiana). Last time Gas was 3.29 and diesel was 2.89, this time it's 2.94 and 3.05 respectively. Also saw where the IRS is allowing OTR trucks to use Off Highway diesel (which is not subject to excise tax). I wonder how much of a hit there will be on taxes.

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mw on October 1, 2005 - 11:25am

Yes, increased prices will reduce demand growth, but it will take sustained very high prices to actually drop demand, on a year over year basis. The last year over year declines happened between 1980-1984, and political action:

Carter cuts oil imports from Iran/hostage crisis...
followed by OPEC cuts, US boycotts of Libya,
Iraqi output disruptions during Iran-Iraq war which, ironically, the US supported Iraq in)...

... so this period of demand destruction was caused by political events cauing price to rise; now, unlike then, real or perceived scarcity has much more to do with the price of crude than political or "terror" premiums.

Also, then, unlike now, people were buying 98 hp Toyotas and Datsuns instead of 300 hp monsters for their grocery runs ;-)

One potential similarity - the US implemented windfall profits taxes back then, and some on Capitol Hill are making such noises again.

Somehow I doubt the current administration is likely - correctly - to do anything that gets in the way of capital investment and exploration. The big concern is whether they do anything substantive towards moving the country and therefore the world to conservation and alternatives.

Prediction: If gasoline merely remains between 3 and 3.50 a gallone, demand next year will have risen once again.

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Murray on October 1, 2005 - 11:49am

I don't think we are seeing much reduced demand for gasoline yet. Most of the apparent demand reduction has been in the gulf coast region. Other regions show little change. There is a huge drop in sales of large SUVs however. Murray

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