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As most people know by now, the strategic oil reserves were tapped by W today. This has caused crude prices to drop, but to me the real problem is not one of supply in this case, which the oil from the reserve addresses, but one of refinery capacity.

A large portion of US refiners along the Gulf are down, offline, or underwater. Those plants may not be back online for weeks / months. Unless all the unaffected refineries can combine to pick up the percent of national refinery capacity that is currently offline then having available oil is irrelevant. At this point I have seen no proof that such a increase in the processing capacity from other refineries is possible.

Gas prices locally seem to have skyrocketed during the day. The consensus is that the prices will drop back again in a few weeks after the market levels off, after the labor day weekend, and once distribution is reallocated, but in the end I still think the real oil problem caused by Katrina is not in supply, but in the refiner section of the market/ industry. Reuters has a story along those same lines today.

Full Post Here

To me the situation caused by Katrina is even more reason to push for new refineries throughout the nation. Numerous newer, cleaner, and more efficient refineries scattered throughout the nation avoids issues like this when one section of the nation is devastated. Especially when that effected section influences a vital market segment.

To me the issues that lead to this problem is additional proof that we need to increase the number of pipelines, reducing the possibility of a large part of them becoming limited or broken. The push for ANWAR, Florida coastal, and California coastal drilling should also be trumpeted at this time where we can begin to prepare for the needs we are going to have in the future.

Long term we need to move away from oil dependency, I think most would agree with that, but that time is a bit of the way down the road at best and until then we need to plan for future needs and situations, including natural disasters, that may arise. Maybe one good thing that can come from Katrina is that we will begin to think more long term in terms of our future energy needs and plan for disasters more efficiently.

This entry was posted on Wednesday, August 31st, 2005 at 4:23 pm and is filed under Current / General, News, Personal, Politics, Technology. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.