Wednesday, August 31, 2005

Hurricane Impact On Short Term Gas Costs

The impact of hurricane Katrina on gas and fuel supplies is not going to be pretty for the near term. There are several articles out that paint a less than appealing picture on gas prices and fuel costs:


Bloomberg has the above article outlining the rise of oil to $70 a barrel:

Oil and natural gas platforms were shut for a fourth day, sending natural gas prices to a record as well. Eight refineries in Louisiana and Mississippi, accounting for more than 10 percent of U.S. refining capacity, were closed by the approach of Katrina, the most powerful storm to strike the Gulf coast since 1969.

``You have an oil market that is quite tight in the products side, particularly in the U.S.,'' said Robert Mabro, president of the U.K.-based Oxford Institute for Energy Studies. ``Then you have a hurricane which closed eight refineries. The market looks at the situation and realizes supplies are even tighter. Prices will only fall if demand declines.''

How long will the hurricane spike effect prices?:

``Even if there's no damage, it's going to take at least two weeks for refineries to come back,'' White said in an interview from Paris. ``It's at least as serious as Hurricane Ivan, which we had last year. And it took six months to get production back to normal in that case.''

The exact impact on energy costs will not be know for several more days, but the early reports and early reactions of the market show that prices are going up and will stay up for the near term. The President is going to release some supply of oil from the “Strategic Petroleum Reserve” SPR as he did in 2004 after Ivan Ivan The SPR is specifically designed for just such events.

Americans need to focus on conserving as much fuel over the next few weeks and months as they can, to help lighten the demand for fuel. Only a lighter demand for fuel will reduce the cost. Some people might not yet see their connection to the hurricane disaster, but they will soon. All goods and services have fuel cost associated with them. Cost are going to rise based on fuel cost alone.

Becoming more fuel consumption aware and reducing consumption as much as possible is a good thing at any time, but given the current situation, it kind of becomes a civic responsibility I’d say…………………………………………….