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What will happen to the oil price when the world attempts to restock the various reserves that have been allocated to America?

Could this increased requirement finally reveal the lack of supply?

I suppose that in part depends on how quick US oil rigs and refineries come back on stream. Obviously Katrina has muddied the waters and it's quite likely that another hurricane could do the same again.

Can someone tell me if I?ve got this correct:

Prior to Katrina, well output was at full tilt (and we believe can?t go much higher), refinery throughput was at full tilt (and there is no economic case for building new ones if there won?t be any increase in volumes of crude), and petrol/gasoline consumption was obviously keeping up with refinery throughput as it was driving it (excuse the pun).

The main driver for oil prices going up was therefore getting close to the peak (admittedly if we suddenly brought another Ghawar online then refining potential might become the restraining factor). Speculation, it was argued, was driving it higher that it should be, but in reality that just proves how close to peak we are.

The effects of Katrina have been to knock some of well production and refinery capacity. The closest of these to the consumer is the decrease in refinery production and hence a decrease in petrol/gasoline ? hence the price rise in gasoline.

To counter this, different strategic reserves ? of both crude and gasoline ? have been tapped. This has led to more crude being available with a slightly decreased refinery capacity and hence a decrease in crude prices.

Where does this leave us? Unless there is economic turndown, once the Gulf of Mexico is up and running again there will be the same well production, refinery, gasoline constraints as outlined in the first paragraph. In addition there will be a need to top up the strategic reserves, thus adding more to the demand side.

Could this potentially twang the recent oil price drops way up?

Add to that the potential for heating oil and gas demand pressures in the winter ? gas production also being effected by Katrina.

All this without any of the following actually having to happen: Saudi unable to increase production as much as it says it can, another Hurricane in the remaining two months of the season, attacks on well, pipelines or refining facilities, a corporatist coup in Venezuela, any problems in west Africa, Iran or the US messing with Iranian oil production?..

I?m not looking forward to Christmas.

Am I missing anything or getting anything wrong?

So people with overly-large, poorly-insulated homes and a lack of woolly jumpers will have to pay more to heat their homes this winter. So more people will consider cycling instead of driving. So Americans will have to think twice before buying a new SUV. Big deal!

Ah the Bill O'Reilly (FoxNews) school of thought - "Some people chose to stay in New Orleans and so it is their fault"

I suspect that lots of poor old people in this country will choose not to turn up the heat, and it will be their fault too?

I agree, any young, healthy and rich person who owns a bike and lives near to work will probably not have too much of a problem this winter - lucky our whole country is full of these people.

Newmac, your summary is pretty much my understanding too. Surely as countries restock their reserves prices will go up again...or maybe they think they will wait until prices go down?

My Grandad is 80 years old. He lives in a house much bigger than he needs and he heats it up way more than is necessary. He is not rich, the govenmet pays most of his expences because he is a war vet. He is a nice man, but he doesn't consider the consequences of his wasteful actions. Even if I talk to him about it, he is dismissive.

Is it so wrong that events should force him into a situation where he has to consider his efficiency? Young people have to be efficient in order to survive and carve out a decent living. Just because my Grandad fought in the war, does that mean he should never have to use his brain or make a compromise for the rest of his life?

My parents are also in their eighties, and need to keep warm because
old people cannot regulate body temerature as well as us young'uns.
They too live in too large a house, which is modern but does not
have cavity wall insulation (in spite of my nagging) and six months
ago my dad finally fitted a new gas boiler - but refused to fit a
condensing one!

The death rates of old people in all western nations still closely follow weather
patterns, both extremes of heat and cold send it way up. With natural gas prices way up in both Europe and the US it seems inevitable that far more old people will not afford the bills and will end up dying in the cold.
Although it could
be argued that this is just nature correcting the imbalance caused by
modern healthcare keeping people alive longer than they would in a
more 'natural' environment, could we also view it as an early symptom
of 'die off' ? To be brutal these are in general people who are not of reproductive age, and many are more of a 'cost' than benefit to society in economic terms - by dying they free up resources (housing , care services, savings) which will become available to their inheritors (or the tax man). Their deaths may actually free up daughters from caring duty and allow them to have children of their own (and most carers are
daughters).

Of course the next stage would be when the young poor cannot afford to
heat their homes and their children start to die. That would definately
be 'die off'

Young people do not have to be efficient. Young people just expect a much greater standard of life than those who have been through harder times (myself included, until recently). Everything now is cheap, easy to get hold of, we can travel miles to work every day, buy a ready-made meal and be eating it 3minutes later, use things once and throw them away etc.

When my parents were young, renting was the norm, people made their own meals from scratch, most communities were still intact, most people worked fairly locally, you were considered well off if you had a car or TV etc. etc. All of this strikes me as being much more efficient than the current situation, albeit a percieved lower standard of life (in material terms).

Some people are more able to adapt to changing circumstances, but it doesn't mean that people who find it more difficult to do that should be punished. I think by the time they reach 80, most people would feel they deserve to able to relax a bit and not worry about things, especially if everyone else seems to be having their cake and eating it.

newmac - yes your take on the situation is exactly the same as mine - at the moment the draw down on strategic reserves is having the desired effect and the price of oil is falling - this may have the additional effect of flushing out some of the oil 'longs' so we may even see prices in the $50s revisited. For anyone wanting to buy into oil this looks to me like an ideal opportunity. As you rightly point out though this is really just a sticking plaster solution. The resrves will have to be rebuilt at some stage and when that happens a new price uptick will begin. In the meantime of course numerous bone headed commentators will make much of the fact that the froth is being blown off the bubble of oil speculation etc, without understanding the fundamental underlying imbalance. Now the timing of all this is somewhat opaque and is dependent to some extent on how quickly Gulf oil comes back on line - I imagine the authorities will want to minimise the depletion of reserves as much as possible so they will close the taps on this as soon as they can.

beev wrote:So people with overly-large, poorly-insulated homes and a lack of woolly jumpers will have to pay more to heat their homes this winter. So more people will consider cycling instead of driving. So Americans will have to think twice before buying a new SUV. Big deal!

Bush: "The American way of life is not negotiable" (My emphasis)

Unstoppable Force. Immovable Object.

In 2001 the UK government estimated that 4 million households in the UK suffered from fuel poverty ? ?A fuel poor household is one that cannot afford to keep adequately warm at reasonable cost. The most widely accepted definition of a fuel poor household is one which needs to spend more than 10% of its income on all fuel use and to heat its home to an adequate standard of warmth. This is generally defined as 21?C in the living room and 18?C in the other occupied rooms - the temperatures recommended by the World Health Organisation.?

With fuel prices now having risen significantly this number of 4 million may well have changed for the worse.

Should fuel prices, mainly gas, rise significantly this winter there will be two effects ? the number of households classed as fuel poor will rise and secondly those already classed will get more fuel poor.

I guess that for the majority of those in the fuel poverty class, their situation is not one of wanton waste ? i.e. they are not poor because they heat their homes too much, they can?t heat their home enough because they are poor.

I would also guess that the number of ?at risk individuals? i.e. young children, the elderly, the infirm who are in the fuel poverty bracket is above the national average.

As already pointed out death rates of those at risk do correlate with hot and cold weather extremes, this has the potential to be exacerbated by dramatic price increases.

grinu wrote:Young people do not have to be efficient. Young people just expect a much greater standard of life than those who have been through harder times (myself included, until recently). Everything now is cheap, easy to get hold of, we can travel miles to work every day, buy a ready-made meal and be eating it 3minutes later, use things once and throw them away etc.

Hopefully, PO will force people to change these wasteful habits.

grinu wrote:Some people are more able to adapt to changing circumstances, but it doesn't mean that people who find it more difficult to do that should be punished. I think by the time they reach 80, most people would feel they deserve to able to relax a bit and not worry about things, especially if everyone else seems to be having their cake and eating it.

People always think everybody else is having their cake and eating it. It's either the government or the young or the old or the rich or the Americans.... take your pick! The fact is, life is hard. People have to use their heads, think about the consequences of their actions, and try to make the right decisions.

grinu wrote:When my parents were young, renting was the norm, people made their own meals from scratch, most communities were still intact, most people worked fairly locally, you were considered well off if you had a car or TV etc. etc. All of this strikes me as being much more efficient than the current situation, albeit a percieved lower standard of life (in material terms).

In Britain, I see so many 'poor' people who like to spend their money on TVs, DVDs and cars. Rich people, too. Give me a bike and the internet any day. But then, I'm thinking about my actions instead of just blindly copying everyone else.

My grandad may not be able to regulate his body temperature as well as me, but his brain is still functioning - yet he still chooses to ignore the fact that he wastes tons of energy in heating his home. It is his choice, and he has a right to make that choice. But he also could do things differently.

I hope he can carry on living in his bubble for the rest of his life, happily oblivious to what's going on in the real world outside. That would be fine with me, because he's basically a good man who always tried his best. It's also a possibility that global events will force him to change his ways. He may have to come and live with his family in Scotland, or he may refuse and choose to stay in his house. Whatever happens, it is he who makes the decisions that affect him, and it is he who shall reap the consequences of those decisions.

If there are old people who cannot make their own decisions, then hopefully they have some family looking out for them. If not, maybe they will be f*cked. C'est la vie. We can't all live for ever. Hope they lived a good live. Etc etc.

I'm sure people reading this will think I'm some kind of nazi, advocating the killing of old & senile people for the sake of efficiency. If that is what you are thinking, please note that I do not wish to kill anyone. I am merely pointing out that sh!t happens, as we all should know.

My point, as always, is that we shouldn't fall into the trap of thinking negatively and seeing everything as a big disaster waiting to happen. We should recognise that life is beautiful and nature has its own reasons for whatever it brings. We should love it and trust it, for it is far wiser than any or all of us.

I think you were writing yours as I was writing mine so have a read above. My point is that some people do not have the 'choice' that others do - this is the concept of structural violence.

My point, as always, is that we shouldn't fall into the trap of thinking negatively and seeing everything as a big disaster waiting to happen. We should recognise that life is beautiful and nature has its own reasons for whatever it brings. We should love it and trust it, for it is far wiser than any or all of us.

In regard to the above, I'm not sure which part of beautiful nature relates to high gas prices because the rich waste it, making the poor not able to afford it.

I'm saying that high gas prices will bring more positive things than negative ones. A good deal, in other words!