Posting in Energy
Hurricane Isaac has forced oil and gas operators to shut in more than 93 percent of production in the Gulf of Mexico and energy companies to close at...
Hurricane Isaac has forced oil and gas operators to shut in more than 93 percent of production in the Gulf of Mexico and energy companies to close at least five refineries, developments that are fueling speculation the White House will release oil from the Strategic Petroleum Reserve.
Isaac made landfall in southeastern Louisiana late Tuesday as a Category 1 storm with maximum sustained winds of 80 miles per hour.
Press secretary Jay Carney told reporters earlier Tuesday that releasing oil from the SPR, which currently holds about 696 million barrels, is an option that remains on the table, according to a transcript of the gathering provided by the White House. Carney did not provide further detail.
Debate over whether the Obama Administration will release oil from the SPR has escalated as gasoline prices have risen and oil production in the Gulf has shut down due to the storm. Tight oil supplies have been compounded by an explosion at Venezuela's largest refinery.
Some energy analysts have predicted the government will announce a release from the SPR by next week, Bloomberg reported. More than a few, including an editorial by Bloomberg, have speculated the oil release would be more of an election tactic, not because it's a true emergency.
The Obama Administration has drawn down the reserve once before. During July and August 2011, about 30.64 million barrels were sold in response to sustained interruptions in global supplies due to civil unrest in Libya. President Obama authorized the sale as part of a larger coordinated release by the International Energy Agency countries.
The effect was minimal for consumers buying gasoline. The price at the pump declined about 2 percent. Prices rose again a week later.
Until now, operators have shut in production as a precautionary measure. Views over releasing oil from the SPR could change if oil and gas infrastructure sustains significant damage from the storm.
The infrastructure hasn't fared well in other weather events. Katrina, the Category 3 hurricane that made landfall seven years ago, killed 1,800 people, caused billions of dollars in damage and devastated oil and gas installations taking out 4.5 million barrels a day of refining capacity.
Aug 28, 2012
The real bottleneck caused by Isaac is in the refining of gasoline caused by Gulf refineries shutting down. It's not in the production of oil. If you look at weekly US crude oil storage, it has actually gone up and the price of crude has gone down even as the price of gasoline goes up (see http://finance.yahoo.com/news/us-crude-oil-supplies-grow-145257198.html ). The oil production shutdowns are about 1 million barrels a day, but the loss of refined products from refinery shutdowns is about 1.3 million barrels a day (see http://abcnews.go.com/blogs/business/2012/08/gas-inches-up-oil-down-oil-production-and-refinery-shutdowns-in-the-gulf/ ). This means refinery closures are the bottleneck in gasoline production, not oil platform shutdowns in the Gulf. Thus any release of oil from the reserves by the Obama administration in the next few weeks is just a political stunt ahead of the election. What will happen is that as refineries reopen and more gasoline becomes available, the price of gas will come down on its own -- a result for which the Obama administration will naturally take credit.
It never ceases to amaze me how the price of gasoline at the pump jumps up by 5 to 10 cents before there is any actual shortage but it takes a week or so for the prices to slowly move back down after the crises (real or imagined) has passed. And, by the way, Im not blaming the gas station owners. These independent businessmen are told what to charge by the suppliers. The BIG OIL companies run the show and we pay through the nose then Congress continues to give the oil companies all kinds of incentives and tax breaks. So we pay through the nose again with our taxes being given away to multi-billion dollar companies making outrageous profits. Re: Closing refineries on the Gulf because of the storm. That was one of the arguments against piping the tar-sands goop all the way to Texas for processing. If it was processed on our side of the Canadian border then distributed within the U.S. wed be talking thousands of new jobs in a part of our country where there arent many jobs to begin with, and less likelihood of the gasoline and other products being shipped out of our country to places like China and India. But, Noooo! The politicians we hired to work for us have again helped the BIG OIL interests.
... in "Strategic Oil Reserve" has come to mean "politically strategic" for whomever occupies the White House at the moment. It's hardly the reason it was formed. And the bump is puts in markets is hardly worth the trouble.
They mark up their price based on what they pay. Besides, what are you complaining about? I thought higher gas prices were a keystone of the progressive energy/economic agenda.
Had a couple friends working for large oil companies (is that better than "BIG OIL" companies?) These are the guys who "handle" or "manage" the retailers selling their company's products. Over coffee I'd listen to them bragging about how they "persuade" the retailers to sell at a "suggested" retail pump price. (One guy was real proud that he threatened to put one independent gas station owner out of business unless he toed the line.) Haven't you ever wondered how/why all the "XYZ" stations in town change their pump price to the same price per gal., overnight? And when's the last time you saw a gasoline "price war?" BP consistently charges a few cents more than most, simply because they are still paying off $billions$ in fines. You don't think the operator of that BP station wouldn't like to drop his price to match the competitor station across the street? He doesnt have a choice, he's told what to charge. (I'm sorry he's offered a "suggested retail price.") But, no biggie. After all, the big companies are all working for our benefit, so they can hire more workers with the tax breaks they get, right?
The retailer has to make a living, no matter what the "big oil company" says. If he charges too much more than the guy down the street, people won't buy his gas and he will go out of business. Your friends might like to stroke their egos in front of you by believing that they have such power over some poor retailer, but they can't compete against that reality. And please tell me: Exactly what's in it for your "big oil" friends in having the retailer sell at a higher price? The oil company gets paid the same either way. It's the retailer who'd make the extra money; not the wholesaler. Actually, the wholesaler stands to lose in the long run, since higher prices ultimately mean lower consumption. Your statement makes absolutely no economic sense. The retailer isn't in business to sell gas for cheaper than he has to. If he could get away with charging more than the market dictates, he would. He certainly wouldn't need the "persuasion" of your big oil friends to do so.