GSTamral
08-31-2005, 02:27 PM
The Status of Katrina/Oil
Oil is hovering around 70 dollars a barrel. Oddly enough, it isn't the problem in this case. The US is releasing oil from the strategic petroleum reserve to ease pressures.
Katrina caused the loss of over 10 percent of the US refining capacity in the short term. Even if we had more cheap oil, it wouldn’t matter. They can't refine enough to meet demand.
Oil wholesale prices 2.90 for September futures on the New York Mercantile Exchange. Pump prices are between 40 and 75 cents above wholesale prices. Estimates for Gas prices at the pump in September range from 3.20 to 3.65. It will not come down anywhere in the near term until the refining capacity is restored, which could take months, after which gas prices may reduce to the pre-katrina levels of 2.50 a gallon.
There is no set timetable for the restoration of the refinining ability of the Gulf Coast, and none will be given until the damage can be assessed.
Several multinational and larger national companies are working on proactively laying off or forcing retirement for non-essential or hourly staff in anticipation of the loss of national demand created by the devastation in an effort to reduce costs to be able to meet market expectations.
Jet Fuel has jumped 22% in the last two days, and on the spot market, it is expected to rise by another 20-40 percent until the supply can be met.
It takes between 18 months to 4 years to build a refinery to handle the lighter crudes, and up to 5 years for ammonia SCR boiler refineries to handle the heavier ones.
16% of the US chicken exports cannot be made. Expect a Chicken surplus.
Over 40% of the nations steel is imported through the Gulf Coast. Expect a steel shortage for at least the next 6 months. This will drive up housing and building costs significantly.
Natural Gas will also move up in price, having done so by 11% in the last 2 days.
Heating Oil is the hardest hit, as prices are expected to be as high as 4 dollars or more per gallon by Winter.
The textile industry may also experience a surge in production costs.
Close to 1 percent of the current United States workforce is currently affected by Katrina. The workers, as well as a significant number of employers are, for all intensive purposes, not a part of the current economic system, neither generating nor spending money. A high percentage of these workers are involved in the export and import process from one of the largest and deepest ports in the United States. Expect catastrophic (negative or stagnant GDP numbers for the next quarter) effects. This may or may not have long term cyclical effects.
The rebuilding costs will largely be covered by insurance companies, however, many of those affected are not insured. How much the government chooses to step in and provide direct aid is unknown at this point in time.
Oil is hovering around 70 dollars a barrel. Oddly enough, it isn't the problem in this case. The US is releasing oil from the strategic petroleum reserve to ease pressures.
Katrina caused the loss of over 10 percent of the US refining capacity in the short term. Even if we had more cheap oil, it wouldn’t matter. They can't refine enough to meet demand.
Oil wholesale prices 2.90 for September futures on the New York Mercantile Exchange. Pump prices are between 40 and 75 cents above wholesale prices. Estimates for Gas prices at the pump in September range from 3.20 to 3.65. It will not come down anywhere in the near term until the refining capacity is restored, which could take months, after which gas prices may reduce to the pre-katrina levels of 2.50 a gallon.
There is no set timetable for the restoration of the refinining ability of the Gulf Coast, and none will be given until the damage can be assessed.
Several multinational and larger national companies are working on proactively laying off or forcing retirement for non-essential or hourly staff in anticipation of the loss of national demand created by the devastation in an effort to reduce costs to be able to meet market expectations.
Jet Fuel has jumped 22% in the last two days, and on the spot market, it is expected to rise by another 20-40 percent until the supply can be met.
It takes between 18 months to 4 years to build a refinery to handle the lighter crudes, and up to 5 years for ammonia SCR boiler refineries to handle the heavier ones.
16% of the US chicken exports cannot be made. Expect a Chicken surplus.
Over 40% of the nations steel is imported through the Gulf Coast. Expect a steel shortage for at least the next 6 months. This will drive up housing and building costs significantly.
Natural Gas will also move up in price, having done so by 11% in the last 2 days.
Heating Oil is the hardest hit, as prices are expected to be as high as 4 dollars or more per gallon by Winter.
The textile industry may also experience a surge in production costs.
Close to 1 percent of the current United States workforce is currently affected by Katrina. The workers, as well as a significant number of employers are, for all intensive purposes, not a part of the current economic system, neither generating nor spending money. A high percentage of these workers are involved in the export and import process from one of the largest and deepest ports in the United States. Expect catastrophic (negative or stagnant GDP numbers for the next quarter) effects. This may or may not have long term cyclical effects.
The rebuilding costs will largely be covered by insurance companies, however, many of those affected are not insured. How much the government chooses to step in and provide direct aid is unknown at this point in time.