October 4, 2005
High Oil Prices Are Global
By: Rowan Wolf
Sitting here in the U.S. it is easy to accept the idea that we are the only ones experiencing increases in gas prices. This is definitely not the case, as we see in the article High Oil Prices Met With Anger Worldwide. The global concern over peak oil has not gone away - nor the rising costs. One has to wonder though in what ways the hurricanes in the Gulf of Mexico have effected the global situation. I am not sure of the answer to that, but maybe one of you do know. I am in the speculation zone here.
What we do know is that (primarily) European nations released (or promised to release) part of their reserves (crude and refined) to the U.S. to ease the shortage here - and shore up the U.S. economy. Since they were drawing on reserves, one wouldn't think that would dramatically raise gas prices in those nations, but it seems to be. It is also raising the prices outside those nations - Nigeria, Indonesia, etc. Something much bigger is going on here.
Is the global oil supply/demand so narrow that simply releasing reserves causes a global effect? Or does oil and gas pumped in the U.S. not necessarily go to the U.S.? Or is oil refined in the U.S. not necessarily for the U.S. market? I don't know, but that seems to be possible given what is happening globally. If any or all of the above are true, then both the U.S. and the world are in for a rough time. I heard some talking head yesterday say that the U.S. is looking at about six months of increased oil and gas costs due to the hurricanes. That is a long and potentially dangerous time for the U.S., but it may also be a very long six months for the world. Further, a lot can happen in six months and the increases are starting to look like a runaway train looking for a place to crash.
According to RigZone, BP alone is reporting $ 700 million in losses from the storms.
The global news, and the emerging damage reports combine to give a context for George Bush's total reversal on conservation. The situation must be dire indeed, as conservation is not going to reduce costs, but it might avert shortages. Those shortages are already popping up. Last week an number of Shell stations in Portland, Oregon ran out of Regular Unleaded. Hmmm.
Consumers in the U.S. seem to be more aware of the situation than some might credit them for. GM and Ford are reporting plunging truck and SUV sales. Ah, how lies come back to haunt one.
Regardless, the August economic figures were down and showed weakening consumer "confidence." That was before the hurricanes. I predict that confidence will sink even lower for the September figures, and continue downward as people start seeing their heating bills go through the roof.
If the global economy, and the oil supply are already responding to ... whatever ... we are all in for a wild ride.