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Oil Sources Check In

From our "Houston Bureau" (which happens to be sited in a leading offshore oil exploration and production company, and they are 110% Americans):

"George,

Our company emergency center has been running full tilt since Friday. Right now, we are looking at catastrophic damage to offshore facilities and the possible complete loss of one of our largest competitor's working assets and marine base for the GOM. [Gulf of Mexico - GU]

As I have mentioned before, GOM assets and construction companies have been working full-tilt since Ivan last year. I have sent you SONAR scans of some of the damage. That was just the eastern Gulf, which has very little in the way of infrastructure. The two trunk lines that run to mid- and upper-Texas will likely be unaffected, but those lines are just about a quarter of supply.

This one is plowing through the center of GOM oil and gas production. We are liable to see complete shut-in of up to 90% of GOM production for the near to long term, depending on luck and little else.

Day-rates for offshore contractors shot up to normal after Ivan last year and have remained there. They are likely going up another 50% or more this coming week and will most likely remain there for the foreseeable future.

In my estimation, oil prices are low at $70 right now. Fill up immediately. Drive very conservatively. I filled both cars tonight as I expect pump prices to spike in the next couple of days as the aftermath is surveyed. I figure $3 is cheap.

Some idea of what kind of destruction could be found: --anchored ships will be pushed by high seas and winds causing the anchors to drag. The anchors will snag pipelines and rip them out causing both interruption to supply and environmental problems. --platforms (there are many types, including drilling, production, service and floating) will be capsized and/or uprooted and lost to sinking or simply disappear never to be found. --FPSOs and the Anderson LOOP could be severely damaged or destroyed resulting in years worth of repairs and long-term interruption to supply. --contruction ships and barges that have run for port may be damaged or sunk in port, with resultant loss to recontruction capability and severe damage to piers and shipping lanes. --run-off from the Mississippi could swamp shipping fairways and cause severe underwater avalanches, damaging port facilities and hampering damage assessment offshore (divers do most of the damage assessment and will not be allowed down until the mud is stable). --severe damage to shipbuilding and dry-dock facilities causing long delays in repair and replacement of fleets. --severe damage to fishing fleets and the industry as a whole. Fertilizers and other pollutants in run-off could cause mass die-offs or severe relocation of marine life. --severe damage to wildlife refuges, salt marshes and wetlands all along the coast. --NOLA's tourist industry may be lost for some time to come and the Quarter may be lost forever.

And that's just a partial list.

Most of the folks I know arrived in Houston this morning. I-10 is clogged from NOLA into Houston, normally a 6-hour drive, it has stretched to more than 18, including large-scale construction on I-10 through Houston.

Best of luck to all and my wishes go with everyone in Louisiana"

Sorry, forgot to post source for above

http://urbansurvival.com/week.htm

They are reckoning $100/barrel this week!

Wow - is it really going to be that bad? $100 / barrel this week? Surely not - I just can't see it being that bad...... please no....

The general rule is that the rumours are worse than the reality, so the markets tend to spike when there's still uncertainty (ie now) and then sell off as the facts become known. Ie total carnage is assumed already, anything less is bearish for the market. $100 sounds like uninformed scaremongering.

I think that there are absolutely no way to make any prediction whatsoever. The situation is simply to complex. The only thing to do is to follow the development as it unfolds.

MacG wrote:I think that there are absolutely no way to make any prediction whatsoever. The situation is simply to complex. The only thing to do is to follow the development as it unfolds.

Can't really agree, but then I work for an oil trading company... go figure.

Tess wrote:

MacG wrote:I think that there are absolutely no way to make any prediction whatsoever. The situation is simply to complex. The only thing to do is to follow the development as it unfolds.

Can't really agree, but then I work for an oil trading company... go figure.

Hmmm... Leveraged hedge funds selling like crazy? Would make some sense....

True, we can't know but we still can't help indulging in that guessing thing. Paul S picked 22nd Aug as the day it hit $70 and the closest to him in these forums picked Sep 9th, so Paul was the winner, and I think the rest of us thought he was being way too pessimistic.

Ruppert has committed to $80 by end of next week, and thinks Katrina could go down in history. Prof Goose and team at Oil Drum are also suggesting over $100, and they have the most comprehensive blow by blow hourly update of the storm damage so far.......

It has turned out to be all very timely in terms of ensuring my Microsoft meeting to discuss Peak Oil today has some sense of urgency.

I don't know about there in the UK, but all the headline news here in Aus about this storm is just about the oil price.

Oil was a big part of the reporting yesterday, but today it is all about the devastation and flooding and 50 deaths. Oil has receded into the background for the moment.

Good luck with the Microsoft meeting - what is the purpose of the meeting if you don't mind me enquiring?

Meant to say we had a friend from Aus with us last night and we discussed climate change - she was telling us about the 40 year drought. But then she mentioned how often she does actually get rain in Sydney, but that it all runs off the gardens and land very quickly and that is why they seem to have a shortage.

I siad that I didn't think it was much different from normal, probably just due to the fact that their are now 20 million people (a few decades ago it was only 5 million) and major industry and agriculture was using up all the water now and that is why the reservoirs are only at 4%! She tended to agree......

I told her about PO and said that she might want to think about returning with her Aus husband and kids to Ireland, but she said she liked the climate in Aus. too much to leave. I told her NZ would be better than Aus, but again she just said too cold and wet....... oh well the subject has been raised.....

nancy- is Microsoft taking PO seriously now? My dad just finished working with them (he was executive director for e-learning in EMEA) and didn't hear anything about this.

A comment on the TOD thread about Katrina said this

One other thing to keep in mind about the markets is that the people buying and selling there are NOT trying to guess what will happen with market prices, but what other people will guess about prices. That's a subtle point that many people overlook; traders don't make money by correctly guessing about fundamentals, they make money by outguessing their fellow traders about future market prices, which are in turn determined by everyone's collective guesses abtuo everyone else's guesses

Which I thought was very valid.

Microsoft

I had asked the corporation I work for if energy depletion was one of the external risks that they consider in their long term strategic plans. They said no, but maybe it should be and did I know of how other corporations were dealing with it in a risk sense.

I contacted Microsoft amongst a number of other corporations, and bodies representing corporations locally. Microsoft, as represented by their PR & Citizenship Directors here in Sydney, say that Microsoft do not regard it as a serious risk to their business in the short to mid term, but it is an opportunity, because of the likely shift to teleworking, hence their launch of a paper 'The Tyranny of Distance' this week, linked to a new teleworking product range. Doncha just lurve their optimism,,and opportunism. (I used to be a corporate CEO - life without growth...it's unthinkable!)

Sydney's water is indeed a pretty dire problem, and I reckon you are better off in Ireland, Snowhope, and your friend may find the climate becomes a bit of a curse. We are Brits, been here 13 years, love it, but are moving up the coast to the volcanic soils and rainfall... (although I like the look of NZ too).