Oil Update

I blogged a bit about the oil/gas situation during the hurricanes. I wanted to follow up with the progress to date.

Chart via The Oil Drum

This is a chart of the so-called, "shut-in" of production in the Gulf of Mexico production region. The bottom axis measures days after landfall of the hurricanes. The left axis is amount of shut-in, or loss in production. The blue line is natural gas and the brownish line is oil.

As you can see, the shut-in was quite significant, virtually total. After landfall of Katrina, some production was able to proceed, but then stopped as again as Rita hit. The current level of shut-in is quite high, but the trend is good, going down slowly but surely.

The Oil Drum:

[I]t looks to me like we are probably going to end up losing in the neighbourhood of 100-150m barrels of oil production for the year. That's about 0.3%-0.5% of total global liquids supply. On the natural gas front, we might guess we'll end up losing about 500-800BCF, which is around 2 to 3 1/2% of North American annual NG production.

To sum it up. That's a lot of oil production lost. And with "peak oil" occuring now (in my opinion, no one really knows yet for sure), don't look for gasoline prices to drop anytime real soon. And if/when they do drop, I suspect the price of gasoline will settle higher than before Katrina because global supplies are so tight.

Natural gas is another whole issue. U.S. natural gas usage is virtually all domestically produced. The loss of production in the Gulf has already resulted in a 70% increase in rates here in California, with promises of more to come. If it's a cold winter, natural gas prices are going to get dicey. And that's assuming that the hurricanes are through.

Looks like we'd better be nice to mother nature...or else.

(p.s., anyone who gets the meaning of the picture at the beginning gets extra extra browning points)