The Oil Drum

The problem is the country (even the world) has no spare capacity.  Even a small disruption causes shortages for everyone.

The storm brings peak oil into our economy right now rather than some time in the future.

Cezar:
     The United States has just lost between 1 and 2 mbd of oil supply for an indefinite period.  For parts of the country, such as South Florida, this may mean that there will be significantly less gas and other fuel available, relatively soon, than is needed for the existing economy.  This is very much a related issue to our underlying theme.  What we, and those who are posting to this site are contributing toward, is an overall understanding of the current situation and how it will affect supplies, since this will model the reality of what might happen with the onset of Peak Oil, which this may presage.

And while we do retain our focus, there is much to learn about what is happening now, and in understanding what is going on.  We are grateful for the information we are being sent, and are trying to pass it on in a useful format.

I think the reason is at the current time we are in a very tight demand supply situation this could be the tipping point for something much bigger. If this turns out to be as bad as it could be we might be looking at the turning point in the US economy and therefore possible demand destruction and this will affect peak oil.

I like to think of the bell shaped peak oil graph an abstract concept and in the real world we are unlikely to see such a uniform decline. What I believe is more likely is a tipping point from which we have demand destruction and as we recover from the economic downturn oil supply might well have started to decline.

Because:
(a) the consequences could be enormous through the end of this calandar year at a minimum;

(b) it's hard for most to concentrate on much else when an entire metropolitan area--that happens to be a center of the energy sector--is in the process of getting washed off the face of the map; and

(c) if P.O. was to be 2005/06, this may very well be the kick-off of the crunch ahead.  

Oh, and yes your comment is rather insensitive given the number of readers (such as myself) with connections to this city.  

i kinda agree with cezar,  there are plenty of other things
to discuss that are more oil focused.

i would love to know more about the platforms and refineries in
the area.  where they are and what their production capacity is.
(sorry if you all have covered this already)

also could someone post some links that give more detail about
demand?  

demand is the key for me and I really don't see peak oil
being rational problem because (as prices rise) the poor people
of the world will not have the money to buy the oil while the
rich will still be using it.  and the global production rate will
be above 75mbd for the next 10 years even if we hit hubberts production
peak today.

there could be emotional problems where consumers freak out and
horde gasoline or investors freak out and crash the stock market
but that is nothing new.

i caught the tail end of a special on bloombery tv about the
'robust demand' but i would like to know some other opinions
thanks

let's do some number crunching here...
as of last week, the EIA reported USA Gasoline Stocks at 194.9mb (million barrels).  this is after a 3.2mb draw down.

how long will it be before USA starts rationing?

the SPR is full and stands at 700mb.  but it's 2/3 heavy sour which we don't have the capacity to refine.  so this means it's only 1/3 light sweet ~ 200mb.

we are down 1-1.5mb crude oil production daily.  we have lost oil import capacity due to LOOP outage, which accounts for ~15%(correct if i'm wrong) of US oil imports. the US imports 60% of 20mb (daily consumption).  20mb x 0.6 x .15 = 1.8mb.  so really, we are out apprx 2.8-4.1mb of crude oil and that is HUGE!

US gas demand, as of last week, stood at 8.623mbd.

analysis anyone?

Well oildrum is taking this topic in notice because it is by in large oil related in every way..Hello where you been?
I'll make a bet that many of the National Guard troops in the NO area failed to show up, they probally got out before the storm came and before they were alerted.
I read the state of LA, is in debt already and this will big time enlarge that ..Certainly the Fed will bail them out.
I was in NO a few yrs back. From what I seen on the various web sites I think it best to abandon the city. For the reason as many above have stated , future storms, below sea level, already destroyed, too much to fix. Its like this If I had a 20,000 dollar home in a swamp destoryed by a storm do I invest 20,000 more to rebuild it or maybe look for a home in a high dry area for the same money? here's an interesting post I am borrowing from a poster below from PO.com Seems the situation is bad>  Burt Coleman

I've been in touch with people who work for the city government and stayed behind. To make a long story short, all hell has broken loose. They are starting to evacuate people to Baton Rouge ASAP because the water from the levee breaks has completely flooded downtown which is right next to the French Quarter. The levee break was about 6-8 miles away from downtown so that means tens of thousands of homes are underwater and potentially thousands of people are dead. To make things worse, the Twin Span bridges have been completely destroyed which is the main interstate 10 link. That means there is no direct route into New Orleans. God help NO.       

cezar,

the current high price of oil is a result of the impending peak.  As you know, demand has finally grown to exhaust all previously-existing spare capacity (mostly Saudi), and depletion rates mean that new production probably won't keep up.  Peak-niks (peakers?) generally regard the coming shortage as a trigger for economic problems and probable recession.  

Katrina may cause a large and sustained oil or gasoline price spike, lasting until (or - heavens - beyond) the onset of the winter heating-oil season.  If that happens, the US economy will probably slip into recession next year.  The housing bubble may likely burst in some over-heated markets, especially in the most-distant suburban or exurban long-distance-commuter areas.

So what of the peak?

1.  A US recession would sharply reduce US oil and gasoline consumption, reducing oil prices but also pushing the peak some distance into the future.

2.  Lower oil prices may reduce the push for rapid expansion of drilling in 'frontier oil' regions and the exploitation of other non-conventional sources (tar, shale), preserving those reserves for the future.

3.  A recession will in effect be a postpone-ment of consumption, giving the global economy time to adjust to rising oil prices by adopting energy conservation measures, both through increased efficiency and through substitution with alternative fuels.

4.  Recession in the US would have major follow-on effects in the other major oil-consuming economies which until now have been growing solely by exporting to the debt-happy American government and consumer.  While they would be hurt by slackening US import demand, lower energy prices (from reduced US demand) would make it easier for countres like China to foster a growing domestic market.

Is that a good answer?

---

More generally, though, I see this site as an oil-and-energy-focussed blog-and-comment-forum that examines current events in the context of energy supplies, esp. fossil fuels.  Katrina's effects on US energy will be huge, and the already-

Or, as the header of every page of the blog says,
"This community discusses myriad ideas related to Hubbert's Peak/Peak Oil, sustainable development and growth, etc., and the many implications of these ideas on politics, economics, and our daily lives."

- Silent E

As I have posted before, I agree with you that the connection to Peak Oil is tenuous at best. Even if Saudi Arabia had a century's worth of oil it wouldn't make much difference. It would still be weeks or months before any increase in overseas production could make its way to the U.S. due to the long distribution chain. And whether Saudi Arabia will peak this year or in 50 years, they only have a limited number of wells built right now (they have fewer than 300 oil wells in the whole country!) so they couldn't ramp up their production all that much anyway.

Interruptions to oil supply are always going to be a problem, Peak Oil or not. Look what happened in 1979 when the Iran-Iraq war caused interruptions. Oil prices shot up, gas lines, all the manifestations of a shortage that we might expect to see today. Yet we were decades away from Peak Oil. The fact that there was plenty of oil in the ground didn't make any difference.

Looking at the effects of Katrina through Peak Oil glasses presents a misleading view. It is a localized and temporary phenomenon, which may cause inconvenience for all of us. But compared to the hardship and suffering the people in that area are going through, the national and global implications are minor.