I think I'll take his advice since I drive one of the biggest gas guzzlers ever made- next to a truck or a hummer

Date:   9/5/2005 10:02:45 AM ( 19 y ago)

COMMENT: Cassandra Utterance.

Dear A-Letter Reader:
When I took high school Latin, one of my teacher's favorite phrases was
"Cassandra Utterance."

Cassandra, as you probably know, was one of the figures of the Trojan
War. The daughter of King Priam, she could foresee the future. However,
she was cursed in that no one took what she said seriously. For example,
Cassandra said: "You know, that wooden horse looks big enough to hide
a small army in."

Instead of listening to her, the Trojans criticized Cassandra for ending
a sentence with a preposition and proceeded to drag the Trojan Horse
inside the city walls. The rest, as they say, is history.

Now, I say all sorts of bad things will happen about energy. Most of
you don't take me really seriously most of the time - and that's okay.
Those of you on my regular mailing list may have noticed that one
after another, the things I've been predicting have come true. I'm not
here to toot my horn on that. I'm here to give you a piece of advice
that will directly affect your life. Hopefully, you will take it to
heart more than the Trojans did.

My view: There is a distinct chance that gasoline shortages will get
much worse and more widespread before they get better.

Now, we've already seen local outages in Charlotte, Indianapolis,
central Florida, central Maryland, and more, even as prices at the pump
soar. The usual head-nodders are lining up on TV to say, "this will all
work itself out very shortly." The time period I'm hearing is two
weeks, tops.

True, many of the refineries that are shut down should be up and running
in two weeks. It's also true that soaring prices at the pump should
make people adjust their driving habits, and that should allow limited
supply to catch up with demand eventually. But here are some things the
head-nodders on TV aren't telling you...

1) The gas squeeze should worsen over the next couple weeks. Nine major
oil refineries in Louisiana and Mississippi shut down due to Katrina.
That's about 11% of total U.S. refinery capacity. Most of refineries
should be repaired and back up and running in two weeks. But that
outage puts a big gap in the supply chain that won't be felt right
away. It will likely get worse and worse, like a rising tide, until
new supply come online.

In its most recent update, the Energy Information Agency reports:
"Unlike 2004's Hurricane Ivan, which affected oil production facilities
and had a lasting impact on crude oil production in the Gulf of
Mexico, it appears that Hurricane Katrina may have a more lasting impact
on refinery production and the distribution system."

The EIA adds: "Approximately 1 million barrels per day (42 million
gallons per day) of gasoline is not being produced. This represents
about 10% of the nation's consumption...

"In addition, major pipelines originating in the Gulf of Mexico area
have been severely impacted or are closed. As a result, the distribution
of gasoline, particularly in the Gulf Coast, Midwest, and East Coast
regions of the country, has been significantly affected. Localities that
were being served from gasoline terminals which already had low
inventory levels, perhaps because they were expecting a delivery in the
near future, could run out of supply before the next delivery arrives."

That tells me we should get used to higher prices - and potential
shortages - at the pump.

2) Some refineries may be shut for several months, according to
experts. That's right, several MONTHS. One of my contacts tells me
that some units are underwater, in other places there is water on
refinery floors causing corrosion and contamination. This should extend
the big squeeze at the gas pumps. Remember, refineries were running at
95.8% capacity BEFORE Katrina. There simply isn't any excess refining
capacity.

3) The news on the carnage in "Energy Alley" is getting worse and
worse. An oil industry insider on one of my favorite oil blogs, The Oil
Drum, reported before it became widely known that many production
platforms in the Gulf of Mexico were simply missing. The insider added:

"Each platform can have from 4 to 100+ wells on it. Most larger ones
have 20-30 wells in this area, with numerous caisson wells. They are on
their sides, on the bottom of the Gulf.

"We also set individual wells as satellites and pipe them back to
existing platforms. These stand-alone wells are called caisson wells.
90% of those in the storm path are bent over, rendering them a total
loss. We would have to remove the existing bent structure and drill a
new well, as bent pipe is basically unusable.

"We utilize platforms as gathering hubs. We pipe the raw oil/water to
them and then send it on for separation, or separate it there and send
finished oil on. Damage to a hub means everything going to the hub
is offline indefinitely. There are +/- 15 HUBS missing. MISSING!!

"In short ...we are looking at YEARS to return to the production levels we
had prior to the storm."

Funny, isn't it, how you haven't heard this on CNBC yet? My view: The
bad news on production in the Gulf of Mexico is like an iceberg - most
of it is still hidden, and yet to impact us.

Now, there is some good news. The Louisiana Offshore Oil Port (LOOP)
wasn't damaged, and is already unloading crude again. But getting crude
into the country is one thing - refining it into gasoline is another.
That's why the Big Squeeze at the gas pump could continue for four,
five, maybe six weeks. And I am pretty sure it will get worse before
it gets better.

I have two recommendations to deal with the squeeze at the pump.

Recommendation #1: If you can possibly work from home, make
arrangements with your boss to work from home at least two or three days
a week. Tell your boss it's your patriotic duty to conserve (and that's
true).

Recommendation #2: Buy a 5- or 10-gallon gas can, fill it with spare
gas, and store it somewhere safe. Be aware, this is not what President
Bush advised in his address to the nation on September 2, when he said
"don't buy gas if you don't need it." But it's my experience that President
Bush and his friends have always taken care of themselves first, so you
might as well follow their examples. And depending on where you live, you
might need that gas two weeks from now, and it won't be available.

Now, before you crawl under the bed with a bottle of gin, let me say
that this IS NOT Mad Max, end-of-the-world time. Once prices go high
enough, once people start to adjust their driving habits, demand
will ease. And the refineries will eventually get processing again -
maybe sooner than the experts say, because they like to give a deadline
that they can beat. But in the next few weeks, you may need that
spare can of gasoline. Eventually, you can use that gas and all you'll
be out is the cost of the plastic can. Even if I'm wrong, that's a small
price to pay for peace of mind.

Make sure you use your spare gas in the next six months - it won't keep
forever in the can.

Down the road, gas prices will moderate. But I believe the days of
"cheap gas" are behind us. Get used to paying more at the pump. Consider
trading in that gas guzzler for something more fuel efficient. Believe
it or not, Americans do not have a constitutional right to cheap oil.

SEAN BRODRICK, Editorial Director
The Sovereign Society Ltd.
E-mail: seanbrod@bellsouth.net

PS: Though our energy situation may be scary, this is no time to
freeze up, especially when it comes to your investments. There are
plenty of opportunities out there that should do very well as oil and
gas prices rise. If you haven't gotten my oil shock report,
"70 Days to Empty," with its 10 recommendations in the
energy sector, and one for any kind of market, you might want to pick up
a copy now.

LINK: http://www.agora-inc.com/reports/190SENGY/W190F902/



 

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