Katrina could trigger $100 oil

Oil prices at 100 usd a barrel are no longer an unthinkable prospect in the aftermath of Hurricane Katrina and Asian demand is part of the reason, analysts said. Predictions by US investment bank Goldman Sachs in March that oil prices could rise to 105 usd a barrel were widely ridiculed, but the damage unleashed by the US storm has made others now consider it a possibility.

Oil prices have risen by more than 50% since the end of 2004 when they were trading at around 43 usd a barrel. The sharp spike in oil prices is attributed mainly to growing demand for oil globally, with the Chinese economy and strong US consumer demand singled out as the major demand drivers.

A pressing worry now is how much damage has been inflicted on US refineries in the Gulf of Mexico region, which accounts for a quarter of the country's total oil output. As of yesterday, more than 88% of daily Gulf crude production was shut down and nearly 79% of natural gas output halted.

resourceinvestor.com -> bloomberg.com :

As Hurricane Katrina slammed through the Gulf of Mexico, energy companies evacuated offshore workers and shut about 91 percent of the region's oil production, or 1.37 million barrels daily. Katrina ripped drilling rigs from moorings, damaged production platforms and curtailed pipeline shipments, idling 11 percent of U.S. refining capacity and leaving oil supplies vulnerable to another crisis.

"There isn't the global spare capacity out there to replace this loss if it continues for a prolonged period," says Bart Melek, a senior economist at BMO Nesbitt Burns in Toronto. "Already the market is tight as a drum, and if anything else happens, say instability in the Middle East, I wouldn't preclude $100 oil at all."

U.S. Energy Secretary Samuel Bodman emphasized the shortage of spare global supply, now less than 2 million barrels of crude oil a day, by saying the government would release oil from the nation's 700 million-barrel Strategic Petroleum Reserve to make up for the lost offshore production.

Natural gas prices rose to records above $12 per million British thermal units in New York because the production cutoff came as U.S. utilities were building inventories for use in the coldest months. "We could have a catastrophic failure of the oil and gas infrastructure going into the winter," said James Glickenhaus, who helps manage $1.2 billion at Glickenhaus & Co. in New York. Natural gas last winter cost $6.786 per million British thermal units. "Now it's almost double that."

Too many people in nature's way

energybulletin.net :

The dead and the desperate of New Orleans now join the farmers of Aceh and the fishermen of Trincomalee, villagers in Iran and the slum dwellers of Haiti in a world being dealt ever more punishing blows by natural disasters.

It's a world where Americans can learn from even the poorest nations, experts say, and where they should learn not to build future settlements like the drowned old metropolis on the Mississippi. Terry Jeggle, a U.N. disaster-reduction planner, cites the New Orleans levee system - dependent on pumps that run on electricity produced by fuel that must be transported in. One failure will lead to another along that chain.

By one critical measure, the impact on populations, statistics show the planet to be increasingly unsafe. More than 2.5 billion people were affected by floods, earthquakes, hurricanes and other natural disasters between 1994 and 2003, a 60 percent increase over the previous two 10-year periods. By another measure - property damage - 2004 was the costliest year on record for global insurers, who paid out more than $40 billion on natural disasters.

But generally it's not that more "events" are happening, rather that more people are in the way, said Thomas Loster, a Munich Re expert. "More and more people are being hit," he said. In the 1970s, only 11 percent of earthquakes affected human settlements, researchers at Belgium's University of Louvain report. That soared to 31 percent in 1993-2003, including a quake in 2003 that killed 26,000 people in Iran, whose population has doubled since the '70s.

The expanding U.S. population "has migrated to hazard-prone areas - to Florida, the Atlantic and Gulf coasts, particularly barrier islands, to California," noted retired U.S. government seismologist Robert M. Hamilton, a disaster-prevention specialist.

The scientific consensus expects global warming to intensify storms, floods, heat waves and drought. Climatologists are still researching whether climate change has already strengthened hurricanes, whose energy is drawn from warm ocean waters, or whether the Atlantic Basin and Gulf are witnessing only a cyclical upsurge in intense storms. Computer models of climate change in the decades to come point to more devastating Category 5 storms.

$6 a gallon

huffingtonpost.com :

- As Americans were nearly getting used to $3 a gallon gas, Hurricane Katrina came along and prices almost doubled overnight.

(2005-09-05 08:26:10 SGT) [Energy] Permalink

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