Gas prices climbed through the roof today, setting a new record of $2.92 a gallon before settling at $2.61 on the New York Mercantile Exchange. This comes as oil companies struggle to bring refineries back online after the cataclysmic Hurricane Katrina let slip the dogs of war on the Gulf Coast of the United States.

Many industry experts are predicting $4 a gallon at the pump despite authorization by the White House to tap into the strategic oil reserves. The Dept. of Energy also announced they would temporarily lift environmental regulations in order to increase production at unaffected refineries.

As initial reports come in on the condition of Gulf oil rigs amd pipelines, a number of them appear to be heavily damaged. This is particularly disheartening because it took months to bring a number of rigs online after the havoc generated by last year's Hurricane Ivan.

Oil futures have been shakey for months on supply fears for various reasons including refinery problems, hurricanes, political instability and simply an inability to produce more crude oil. The rigs in the Gulf of Mexico produce approximately 25% of the U.S. oil supply.

President Bush agreed today to release some of the stock in the strategic oil reserves and that held down prices somewhat in oil trading but it failed to solve the gasoline shortages. Some communities have already taken to rationing gasoline at $15 or $20 limits. At $3+ a gallon, that's not much petrol.

End In Sight

Not likely. New Orleans is the largest port in the United States and the city is under 20 feet of water in places. The mayor of New Orleans is predicting 16 weeks or more to pump the water out of the city. In that time, they will be working to restore utilities, clean up the mess and bury the dead, which he believes numbers in the thousands. With transportation in the city near impossible, New Orleans doesn't look hopeful.

Other cities in Mississippi got hit just as hard if not harder but the storm itself with reports of 100 dead in one county alone. Once again, it will be months before the clean up is complete and when the ports will be ready for traffic is unknown. It will also take months to get the oil rigs back in line in the Gulf. It's going to be a long wait for things to return to normal.

Economic Downturn?

Oft quoted economist Dr.Pete Morici at the Smith School of Business at the University of Maryland said some weeks ago that if mortgage rates climb another 1.25% or if oil goes to $80 a barrel then an economic slow down would occur. If both happened, he predicted a full blown recession. He really didn't address the issue of a natural disaster potentially wrecking the U.S. oil infrastructure. As gasoline prices continue to rise, one wonders whether the additional capacity of other refineries after the environmental rules were lifted will be able to make up the difference.

Response

Not much, this is my story. You tell me!

posted by Stithmeister @ 10:37 PM
 
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