Katrina...Energy...the Economy

The Oil Drum had some worst case scenarios for the impact of Katrina on the energy industry on Sunday and Monday. It now appears that those worst case scenarios may have been optimistic. Twenty oil platforms are missing and the ones that are still in place are heavily damaged. The status of the deep water ports, pipe lines and refineries are still uncertain. Today the Oil Drum has a fresh look at the impact from new but still incomplete information, Ideas about the future of Energy in the US. Go read the entire post but here are the bullet points.

1. Domestic oil production is reduced for a relatively decent amount of time (12-24 months) by, hmmmm, say 15% (note from PG, this is well above the 10% reduction for greater than 90 days that was described as a "nightmare scenario" a few posts back by experts...and these numbers are in line with the GOMEX oil supply outage predictions.)


2. 1,000,000+ people are out of work. They may not be placed on the unemployment rolls due to bureaucratic magic, but they are nonetheless out of work, and most without somewhere to live.


3. The primary shipping point for goods delivered to the central part of the country is likely out of commission for 12-24 months.


4. Traffic to the affected area is restricted due to roads, especially the interstates like I-10, being destroyed for 24-36 months, WITH rapid rebuilding. (Note from PG, this is especially true of the LOOP/Fourchon areas...getting supplies in there via ground to fix anything will not happen for a long while).


5. Oil company exploration plans are extended for a few months due to sorting out hurricane damage.


6. Refinery output looks like it will be curtailed by 20% or more for several weeks because of power outages and infrastructural damage.


7. Shipbuilding (including naval boats, oil rigs, platforms, etc.) is hampered by the loss of multiple shipbuilding facilities in the affected area.


8. In a very tight steel market, demand begins to surge as rebuilding of the infrastructure begins.


9. The same thing happens in the cement market.


10. Grain exports are reduced as the other international ports cannot take up the slack caused by the loss of New Orleans, or the costs incurred shipping by truck instead of via the river are much higher.


11. Gasoline, diesel and heating oil distribution to areas via the Port of New Orleans have ceased for the foreseaable future. This is especially true until the power can be restored so we can see if the pipelines are functional. Without power, we cannot tell anything, as they have to be pressured up.

A pretty bleak picture. The Oil Drum concludes with:

The solutions? There are myriad policy options, we just have to motivate the people who represent us to make the right ones.

I haven't seen anything from either Democratic or Republican politicians that would lead me to believe that the right policy options will be implemented.