Monday, August 29, 2005

Costs of gas disruption 

It's worth spending some time this morning thinking about disruptions in oil and gas supply resulting from Hurricane Katrina.
``There is a long list of production and refineries out because of the hurricane,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``The course is similar to what we saw with Ivan last year, which hit production for a long time.''
The markets today are rather holding their breath in wait. Hugh is concerned about $4 gas, but I don't think that will materialize.

Thinking about Ivan sent me back to the Energy Information Agency's "This Week in Petroleum" newsletter for the latter half of Sept. 2004. Here's the one from Sept. 22 and this from Sept. 29. What I learned from this was that the size of the spike in gas prices from Ivan was about 12%; 45 million barrels were lost overall over the six months after Ivan. There is much writing about inventories being so much lower now than then, but EIA reports inventories being up since the end of July, so we might expect about the same here. That would make gas check in around $3 a gallon, likely by the end of the week. (This morning's drive down Division Street here in St. Cloud showed prices at $2.519 for unleaded regular.)

Reuters reports (bottom item) that the Saudis will pump another 0.5 million bpd starting in September to try to make up the loss, but the crude they pump is difficult (and ergo costly) to distill to gasoline. And James Hamilton reports that oil is being imported already by a greater amount than was being refined, so there are stockpiles of oil on hand to send to the refineries, if they can operate.