Gas Prices Rising
Regular unleaded at $2.99 at Lake and Excelsior
Supply disruptions caused by the devastating hurricane have driven up gas prices all across the country.
At this point, it's petty to complain about this minor inconvenience when people are still dying. However, the rising gas prices are an example of how we are all connected to a larger system. With world-wide supply so tight already, there is no one who can pick up the slack.
I agree with the decision to release some of the Strategic Petroleum Reserve. This is what it's for.
But this is also a signal that it's time to get serious about conservation. Supply will still be tight when shipments are restored, and another disaster or terrorist attack could jack up prices even more. Better to be prepared.
Update: Today (9/1) the price of gas at this station was up to $3.09/gallon this morning. This evening, it was $3.19/gallon. That's 20 cents in 24 hours!
Kos diarist and energy industry consultant Jerome a Paris examines the economic and geopolitical impact of Hurricane Katrina.
The Oil Drum has a very scary report from an anonymous Gulf oil industry insider. The insider's company is looking for their oil rigs. They can't find tens of them. The Coast Guard confirms that at least 20 oil rigs are gone. She says this will take hundreds of thousands of barrels of oil a day off the world market for months as they work to reset the wells.
The Oil Drum also has a link to a CNN report on the gasoline shortages due to parts of the Colonial and Plantation pipelines being knocked off line. These pipelines supply gasoline for much of the East Coast.
posted by Luke Francl @ 7:15 PM |
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11 Comments:
FYI - there's 40+ years of oil in the Alberta sands at about $40/BBL.
The reason for the tight supply is that that market makers are expecting a reaction to world events (Mid-East war, Chavez, China demand) to create an oil glut soon (like after the 70's oil crisis) so no one wants to invest in a long term project that locks production to $40/BBL.
That and refining bottlenecks (which just got narrower.) There's a lot of oil companies trying to figure out what the future price of oil is. The consensus is still $28ish (well, before yesterday) - and so, we wait for all the market players to finish their game of chicken.
Releasing the strategic reserve before would have just let the game drag out, it wouldn't have influenced it.
Now we have short term instability brought on largely thru a lack of information. There reallys isn't any scenario that keeps prices as high as today, but not knowing what scenario to play does, in this case, dragging things out is a good idea. Keeps prices down while info gets out.
Supply will always be tight, excess capacity is a thing of the past. (Look at semi-conductor and memory industry after the Kobe quake in 1995 - for a while there a 1MB of memory was as much as $100 - I just checked, 512MB for $50.) One more earthquake though...
It makes much more sense for a business to build capacity in response to demand. That's because businesses will run the most efficent plants to meet initial demand, and idle the less efficent plants if they aren't needed. Even when excess is demanded, margins aren't there from less efficent plants and as a result firing them up puts businesses in a situation where raising production incurs enough cost to lower margins. I can make 10 a BBL now or double my output and make 4 a BBL is the reality of the choice.
(Tech changes too fast as does codes and regulation.) Best to ride the excess demand and use it to create new state of the art fully compliant plants after they are needed.
Of course when oil drops to 28/BBL again, you can chuck the plant away completely along with the investment. Its usually countries like China and Russia that make up the production gap in the short run, Nationalized industries are able to set long term prices and can be sure to sell full prod at a fixed price.
We could accomplish the same thing with an energy policy that says 50% of energy must be domestic, but even if it was legal it would only ensure inflated prices in the long run.
I expect ANWAR drilling to start in earnest and be coupled with a big refining operation, why ship crude when transport costs are high. Better to ship product. MN is going to have to be careful that the corn regs don't screw us worse if that happens.
That aside, I suspect two years of high gas prices. The good news in that is inflation stays flat, interest rates stay low, and housing continues to boom - the bad news is that gas and oil are only part of the larger energy sector.
Its going to be a cold winter.
-Censored
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Time to embrace biofuels, folks!
The American Lung Association of Minnesota already has, because they burn cleaner than petro-based fuels.
See our site for the details:
www.CleanAirChoice.org
I have a observation, Do any of you notice anytime there is a hint of gas prices rising there are 2 companies that are all to eager to raise there price. BP and SINCLAIR, and it's usually 20 to 30 cents higher then the average in the cities. I was watching CNN last night and they showed a BP in Atlanta: Regular unleaded = $6.oo a gallon. Even the reporter was physically disgusted by the consumer gouging of this business. Hotels in the Atlanta area: Mondays rate for 1 night stay $48dollars, Tuesdays rate: $128 dollars. Local officials say they will investigate and fine businesses that are gouging. I say everyone needs to make a mental note of these scumbag businesses and never, and I mean NEVER give them a dime of your money.
Scott K
Anon,
I agree they are scumbags, but you also have to remember businesses like this are also franchised so be careful not to punish your neighborhood BP station owner who has nothing to do with the other BP station owner scumbags.
I know the owner of my local BP and he just owns 2 stores around my area.
But this is also a signal that it's time to get serious about conservation.
He says while taking a picture from his car...
I sure hope the car is a hybrid!
Time to embrace biofuels, folks!
Perhaps…but they still have a LONG way to go…
Study: Ethanol Ineffective Energy Source
Actually, it's not a hybrid. We looked into getting one, but we don't really drive enough to make it worth it. And we needed a car now instead of six months from now, because we drove our old one into the ground.
My family only has one car. How many does yours have?
I take the bus to work or carpool almost every day. How often do you bus or carpool?
My family owns 2 cars, both 4 cyl...and I bike to work most days...if weather is in question I drive 1/2 of the 32 miles one way, and then bike the rest...at least until gas prices become more reasonable...and then, who knows!
I would also like to note that I take my 2 1/2 year old in the Burley when I go to Target. It's about 6 miles one way, but it's hardly worth starting the car for such a short trip.
Good for you, Anonymous.
It seems the increased gas prices will hit our families less hard.
http://heraldsun.news.com.au/common/story_page/0,5478,16441087^664,00.html
Interesting Forbes article. He sees 30-35/BBL in a year.
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Examples
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