Posted by: Rob | September 12, 2008

Hurricane Ike

I’ve been reading news reports on the web and watching some video as hurricane Ike bears down on the Gulf coastline of Louisiana and Texas.  By all accounts, Ike is a massive storm and has the potential to do a lot of damage although, I imagine, there is a tendency to over-inflate the magnitude of probable outcomes in the wake of natural disasters like ’05’s hurricane Katrina.

There was a time when I had never heard of a hurricane and could only imagine what places with names like Louisiana and Texas were like.  Now, of course, not only have I been to these places – walking along the seawall at Galveston and swimming in the Gulf at Quintana Beach – but I know more than a few people who live in the affected zones.  As I look at pictures of the streams of evacuation traffic outbound from the coastal areas my thoughts are with my colleagues, acquaintances, friends and their families.

Walking in from the parking lot with my boss this morning I mentioned the latest I’d seen on the web about the storm.  My employer owns manufacturing facilities in the affected regions and these have all been shut down in advance of the storm.  Non-essential personnel have been released to evacuate to higher ground.

Naturally, in addition to the oil and gas platforms in the Gulf, all of the oil refineries in the Houston area have been shut down as well.  This, of course, makes perfect sense.  It would be dangerous to continue to operate facilities like these in a storm of such magnitude.  If something occurred or something broke loose the resulting events could be catastrophic.  Better to shut down and minimize overall damage.

Thanks to consolidiation and economies of scale, the Houston area contains a significant percentage of US refining capacity.  WIth that capacity all shut down now in advance of Ike’s landfall, there’s bound to be a sharp decline in the inventory of refined fuels (gasoline and diesel).  Naturally, demand will not be curtailed, it may even be increased and, in the balance between static or increased demand and reduced supply, prices will go up.

Also thanks to the “globalization” of economies we in Canada will apparently have to share some of the “pain” of higher prices.  Even though we get nary a drop of refined gasoline from the US and even though we’ll get nary a raindrop from Ike where I live, our fine refiner/marketers have decided that the situation warrants a little profiteering.  Overnight, gasoline pump prices spiked, on average, 13 cents per litre.

That is evidently the premium we have to pay to keep gasoline here for our own use, rather than having the refiner/marketers pipeline it down to the US to take advantage of the favourable “market” forces in play due to the impending hurricane.

I, for one, am getting rather weary of this whole charade.   And, despite the fact that this situation has happened repeatedly over the past several years, I still haven’t seemed to develop the siege mentality necessary to recognize these impending events and act accordingly to protect my own financial resources.

That will have to change.

Man, I miss the carefree days of the ’70’s.

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Responses

  1. Where were you in the 70’s? I was in gas lines trying to fill up. I remember when OPEC took over and suddenly gas was sky high. Of course, now we look back fondly at those prices, but it still hurt, especially when you lived in the boonies, and had to drive 30 miles to even get groceries.

    Well, um, I was at home. In Canada. Unhated by the Saudis. Plus I was a few years yet from driving age when the whole OPEC embargo thing happened. We were also a long way yet from “global integration” as well and things were a little more regional and isolated.

    The most carefree days of the ’70’s for me was the latter half of the decade as I tottered through my high school days and headed towards the promise of adulthood and *gasp* responsibility.

  2. there is no connection between gas pricing and supply/demand. it’s all speculative… and designed to work in favor of everyone but the consumer.

    like you, i’m bummed for the people who choose to live in coastal areas and have to shutter the homesteads every time a storm comes through. key word, however is “choose”…

  3. There’s always an unsettling confluence between an environmental disaster and record profits for the oil companies at the end of the quarter. Mark my words. Grrr.

  4. …all i know is that ike kicked butt here in ohio. at half strength, ike knocked out power and knocked down mature trees. i can’t imagine what it would’ve been like full force.

    that said… the gas price setters must use a dart board, then add 10% for fun… twits.


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