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DoubleBubbleTrouble

Petrol Economic Shock Potential

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I don't think Rita will "take out" any refineries as in cause serious structural damage, but the damage will be done by days of refining lost ahead of the winter.

There are serious concerns over the ability to build adequate heating oil stocks ahead of winter. Oil traders are even looking to move heating oil from Europe to the US as US price rocket, and Europe is a net IMPORTER.

That means we get left short, and the long range forecast says we are likely to have a very cold winter here in Europe.

I also believe that the official inventories figures in the US are being massaged, now that the oil price has become such a big political issue. The markets are starting to distrust them.

Refiners are going to be playing catch up for months after this.

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I don't think Rita will "take out" any refineries as in cause serious structural damage, but the damage will be done by days of refining lost ahead of the winter.

Sorry poor choice of words on my part... I meant disable refining capability for non-trivial period of time.

There are 4 still down from Katrina and 10 operating at reduced capacity.

I recall an article in June saying the US was on a knife edge in terms of refining capability as it was, due to years of underinvestment, and all it would take is one a major refinery to be hit by an incident to cause a major shock. Seems a long time ago now.

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Sorry poor choice of words on my part... I meant disable refining capability for non-trivial period of time.

There are 4 still down from Katrina and 10 operating at reduced capacity.

I recall an article in June saying the US was on a knife edge in terms of refining capability as it was, due to years of underinvestment, and all it would take is one a major refinery to be hit by an incident to cause a major shock. Seems a long time ago now.

And one result is that natural gas prices in the US are going nuts, far bigger percentage increases than even refined oil products.

This is going to feed through into US CPI, because a lot of US industry uses natural gas for process heating. Could be one reason the Fed raised interest rates despite Katrina.

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No idea if this guy is a nutjob or not. But some interesting points - diesel, food production and as has been mentioned a few times before the waste of time that boosting sour crude production volumes are - anybody got any source of the stats?

http://www.fromthewilderness.com/free/ww3/...ita_storm.shtml

Fully 30% of all US refining capacity is in the target zone. Perhaps most importantly, almost every refinery capable of producing diesel fuel is in immediate danger. This promises (especially in the wake of Katrina) a devastating and irreplaceable shortage of the diesel fuel needed to power America’s harvest of grain and food crops this month and next. Without diesel fuel to power the harvesters and combines, crops may be left to rot in the ground presenting a double whammy: food shortages (with prices that may treble or quadruple) and export defaults negatively impacting the financial markets and trade deficit.

Even before Rita strikes, fully 30% of all domestic natural gas production is shut in. The US cannot import natural gas from overseas like it can both crude and refined products. Repair work on infrastructure damaged by Katrina has been halted as crews have been evacuated. The remaining half of Gulf energy production undamaged by Katrina is directly in Rita’s crosshairs. Natural gas prices are up over 110% and home heating oil futures are up almost 70% before Rita even gets here. Since Katrina, US domestic oil production is down one million barrels per day (from 5Mbpd to 4 Mbpd). We were producing 9 Mbpd less than a decade ago.

Peak Oil has made replacement of losses almost impossible even as Saudi heavy-sour is being spurned as useless around the world, even with discounts of up to $10 and $12 per barrel.

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I don’t get it.

If America's refining capability is reduced by 30% why does the price of petrol go up globally? Surely that would just mean less petrol for America (Price goes up in America) as we have our own refineries that are not effected.

And if they can’t take that 30% of crude then surely if could be sold else ware, pushing prices down?

Someone please explain

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If America's refining capability is reduced by 30% why does the price of petrol go up globally?

Because they've been buying petrol in Europe and shipping it to America.

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If America's refining capability is reduced by 30% why does the price of petrol go up globally?  Surely that would just mean less petrol for America (Price goes up in America) as we have our own refineries that are not effected.

And if they can’t take that 30% of crude then surely if could be sold else ware, pushing prices down?

Someone please explain

It's a global market. If they can't make the petrol they come and buy it from us. That means less for everyone so prices go up due to a lack of supply.

The crude prices are being driven by the shutdown in production of crude oil in the gulf, by sentiment and sheer speculation.

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It's a global market. If they can't make the petrol they come and buy it from us. That means less for everyone so prices go up due to a lack of supply.

Perhaps the government should put a stop to that; I know its not going to happen.

Oh well walking to McDonald’s will do the fat lazy turds in America some good.

Thanks DoubleBubbleTrouble

Edited by smarty

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DoubleBubbleTrouble,

Nice graphic. I read somewhere else today that Rita is edging further north taking it over warmer water. The implication is that the storm could strength still further.

Looking at your graph it would also take straignht into the densest concentration of refineries.

This could be much worse than Katrina in economic terms.

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Perhaps the government should put a stop to that; I know its not going to happen.

I'm not sure if there are any regulatory mechanisms in place to limit the sale of UK oil refined products overseas in certain circumstances... who knows there might be... any city guys know the score on this?

I suspect though we will all be in the same boat if the worst does happen. It's not in most countries interest to see America's economy in big trouble so they will be falling over themselves to help out no doubt.

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DoubleBubbleTrouble,

Nice graphic. I read somewhere else today that Rita is edging further north taking it over warmer water. The implication is that the storm could strength still further.

Looking at your graph it would also take straignht into the densest concentration of refineries.

This could be much worse than Katrina in economic terms.

Agreed midway between Houston and New Orleans seems to be the worst area it could hit and she keeps steering towards that area.

Mind you they've been known to change change direction at the last minute so who knows what's going to happen. It would be pretty unlucky to have two major hits on refinery areas in the same year!

Edited by DoubleBubbleTrouble

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From the article above:

Location of all the rigs and the respectrive hurricane tracks of Rita and Katrina.

http://gom.rigzone.com/rita.asp

Tracking is now wrong on that image, current predicted path takes it right through the big cluster of fixed platforms.

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Check out this rather scary image from CNN

map.gif

How many of these would Rita have to take out to really give us that economic shock all soft landings hate?

That map is quite reassuring after brief inspection; first, the grey zone is not the total area affected by the hurricane but an uncertainty map of the path it will take, and second, much of the large grey area on land actually shows areas where wind speeds are 39-73 mph.

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Just found this via google. It is one hour or so old.

http://money.cnn.com/2005/09/22/news/economy/rita_threat/

They are talking of $5 a gallon and heating oil shortages!!

Worse there do not appear to be enough repair crews available to fix the damage as many are still working on the damage caused by Katrina.

$80 a barrel anytime soon?

I have an uneasy feeling this could be the economic shock many have been worrying about!

Edited by FTBagain

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That map is quite reassuring after brief inspection; first, the grey zone is not the total area affected by the hurricane but an uncertainty map of the path it will take, and second, much of the large grey area on land actually shows areas where wind speeds are 39-73 mph.

I think you are reading this a bit wrong... noone is saying Rita could damage all the refineries on that map... it's showing the distribution of refineries it could hit with full force is similar to or higher than Katrina.

Katrina affected 18 refineries in Louisiana, 10 of which are still operating at reduced capacity and 4 are out completely for a siginificant period of time.

The question is how many more refineries would need to be disrupted to cause a major shock... not many I suspect...

Edited by DoubleBubbleTrouble

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You can't do much to stop the flow of petrol across the Atlantic. Most volumes are traded, and as soon as the 'export parity' price is breached, i.e. the wholesale price of petrol delivered to the US is greater than our domestic price plus shipping the flow goes west.

The irony is that for much of the 90's oilco's have been shutting down refining capacity in Europe as the market was in oversupply, refining margins were too low to give an acceptable return of capital, and the surplus on the market was being offloaded to hypermarkets, destroying retail margins into the bargain.

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Perhaps the government should put a stop to that; I know its not going to happen.

Oh well walking to McDonald’s will do the fat lazy turds in America some good.

Thanks for that post very, 'informed' stereotypical view of Americans

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