Posted on 08/18/2007 2:20:21 PM PDT by xcamel
The price of crude oil is down some 8 percent since August 1. What the oil patch and every oil trader knows, one of the quickest ways to turn around this tumble is the drama of a good old fashioned hurricane in the Gulf of Mexico wending its way toward the Texas and Louisiana coasts. And Shazam! Here comes Hurricane Dean!
Hurricane Dean's every little ripple will be reported by the oil industry flacks and their willing mouthpieces in the media. The crescendo of ominous events will be forecast and analyzed, all with a unanimity of purpose leading to higher and higher oil prices. Whether the storm actually hits or not, one thing is sure. The mere specter of the event will have the oil industry and the oil trading community cheering, "Go Big Dean, Go".
A worst case scenario, should Dean gather momentum and do real damage, the curtaiment it might cause would be a temporary stoppage of 2 to 3 million barrels a day, and that probably is a very big stretch. A dislocation of this magnitude for 30 days would be extraordinary. Daily production stoppages would have rapidly diminished, so that by the end of 30 days they would be far less than those indicated, if at all.
And a very important point, this is a temporary loss of production, not loss of oil. The oil is simply not produced, remaining in the well to be pumped at a later date. And this is key.
Please remember we have some 740 million barrels of oil in our Strategic Petroleum Reserve (SPR), bought and paid for with American tax dollars. Therefore, would it not be great good sense to make the reserve available to the marketplace during these temporary emergencies in order to stabilize the market?
Were the Department of Energy truly interested in the general good, they would immediately announce that the Strategic Petroleum Reserve would be made available should Hurricane Dean cause any shortfall of oil production. After all, is there a significant difference if the oil is stored in a salt dome in Texas as opposed to remaining in a well located in American territorial waters or on the mainland, and available to be pumped later?
Thereby the SPR would be neutralizing any negative impact, psychological or otherwise that the oil interests could muster to scare us into ever higher prices. But you see here's the catch, our Department of Energy has the oil industry's interests at heart, first and foremost. The rest of us come a very distant second. To use the SPR to stabilize market conditions is something the Depatment does only with the greatest reluctance. This,even if it is in the nation's economic interest but happens to be in conflict with the oil industry's ongoing march to ever higher prices.
Can you hear the oil patch cheering in the distance, "Hurricane Dean, we're with you all the way". Meanwhile, the rest of us should get ourselves ready to shell (pun intended) out more at the pump.
IMO this idiot is cheering on the Hurricane so he can cheer on his cause
against Big oil. Besides that, I thought it was production, not oil supply
that causes prices to rise quickly.
What a {expletive deleted} MORON.
Can you believe such ignorance?
I learned some really important things from this article.
1) People who produce oil are really evil.
2) The press is on the side of these evil big oil people.
3) The department of energy loves the evil oil people, but hates all the rest of us.
4) The evil oil people love hurricanes because they make people suffer.
There, now I’m thinking like a Democrat. No wonder they can’t make anything work right.
” The mere specter of the event will have the oil industry and the oil trading community cheering, “Go Big Dean, Go”.”
Hard to believe the industry actually feels this way. Yes the price goes up, but if the storm knocks out your production, then it’s a bit hard to sell product.
What else can one expect from the OP ED section (or any section for that matter), of the Huffington Post?
There are times I really think there should be a list of people who will not be sold petroleum products at any price. The writer of this ridiculous tirade is one who should be on that list.
No one in the industry is a fan of setbacks.
Rubbish. Refinery's have to be where the oil is. They are going to be on the coast to minimize the trucking of the crude. Why cart 100 tonnes of crude, when you can refine it and cart 80 tonnes of gasoline, diesel or other refined products.
However, Congress and local interests have stopped production of new refining capacity over the last 30 years.
Rubbish. No new grassroots refineries have been built in ages, but the existing refineries have been expanded over the years.
We are stuck in a situation with dependence on refining capacity in an area prone to weather disasters.
Not really. A storm is only going to take out one small section of the coast. You are thinking of the oil and gas drilling rigs in the gulf.
Energy markets react in a non linear manner to events. If you think that speculators are irrationally driving price increases, you should bet on the opposite end to make a nice profit.
How did that line come from?
Postulating that Dean stays on the NOAA's current predicted track, Dean will hit South of Brownsville sometime Wednesday afternoon. The only production that will be affected will be Mexican production, although the Texas Oil coast refineries look like they'll get drenched. Net effect on US energy mkts? Virtually nil, if NOAA's track eventuates.
If this track is still valid Monday morning, then when a lot of longside traders wake up Monday, they're going to be treated to a rude shock, option IVs will fall out of bed (an event for which yr hmbl srvnt has been waiting), and energy mkts will have ONE spike lower and then rebound.
You heard it here, first.
Good trading to you, professor!
Absolutely right.
Many rich white Northeastern liberals happily exploited the deaths of poor blacks in Hurricane Katrina to promote their Goronic “Convenient Lie” crusade against Big Oil.
Not so, m'friend; they just have to be on one pipe or another. How much production do you think is in/near Coffeyville, KS, for example?
The article is only going by recent past history,and that history has shown the oil industry cranking up prices for any reason they get !!!
Ignorance? I don't think so. Ignorance can be corrected. This person is suffering from terminal stupidity.
Yep. And, ya can’t fix stupid.
Expanding existing refineries is the only way to increase capacity in this environment. There are two efforts (Arizona and South Dakota) to build new refineries. The Arizona project has taken many years to get approval but now investors must raise several billion dollars in a few years to make the project a reality.
There is a good case for diversifying refining capacity to reduce dependence on hurricane prone areas. I concede that there will always be significant capacity in hurricane prone areas because of the shipping costs. Diversification for reducing risk is a reasonable goal however.
My comment about investment involves the focus of the article. If someone understands that price movements are not justified by the actual supply/demand situation, you can make money by riding with the speculators before the price falls or betting against the speculators just before the price falls. The article implies that speculation and irrational fear are driving the market, not actual supply/demand concerns.
A storm can remove significant refining and production capacity. With tight supplies, loss of a small amount of production and refining capacity can cause large movements in price over the short term.
compounded by "stuck on stupid"
I worked in the oil field for over 25 years ... and we never cheered for a hurrican.
Why is there a never-ending supply of experts who have yet to make great good sense?
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