And this brings up the whole issue of the Strategic Petroleum Reserves. Until recently the US was still filling ours, up to its current level of 700 mb with the new intent to go to 1,000 mb. Now the Chinese have just built their first facility, and plan on extending it further. At one time they were talking about starting to buy about 600,000 bd from about now to begin filling it. Well here we are with both apparent demand and supply balanced at around 84 mbd. We have just dropped overall production by let us say 1 mbd. At some stage in the none too distant future the oil companies now borrowing up to 2 mbd will have to give it back. If at the same time the US and China (not to mention any others with similar concerns - note where we are borrowing oil) also start to increase their own SPR's then it is quite likely that we can see an increased demand for 2 mbd or more, going into such reserves.

Now while I understand the reasons for this, and Econbrowser's points about putting it away against future value, what worries me more than a little is that this is bound to bring additional pressure against the available supply, with an obvious increase in cost. Surely that was not the intent when the decision was made to increase the US SPR ?

And further to comments we have made about the difficulty in getting to Port Fourchon and the supply depots at Venice. The NYT has a story about the conditions in that area. When the movie "The Oil Storm" described the fictional aftermath it got this bit sadly correct

Few if any houses survived; those not still under water were flattened in place or thrown acres away. Hundreds of pleasure boats, fishing vessels and small ships were indiscriminately dry-docked, tossed onto embankments, into swamps, even onto the state highway. Oil refinery tanks crumpled into balls; bits and pieces of homes scattered like confetti; downed telephone wires snaked off into uselessness; and virtually no living thing was around, save for stranded livestock, crying seagulls and a few dogs looking for masters. There is no visible National Guard presence, no smaller version of the hectic recovery taking place farther north. This is partly because the hurricane essentially severed the area from the rest of Louisiana; the view by helicopter, the only way to get here other than by boat, shows impassable Route 23 submerged then dry, submerged then dry. . . . . He started walking north on a deserted stretch of Route 23 called the Empire Bridge, accompanied by his oil rigger of a son, Ryan, and Lt. Steve Zegura. They pointed out how the hurricane had twisted the bridge, bending it west toward the bay.

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