Posted on 08/07/2006 5:27:11 AM PDT by governsleastgovernsbest
view edit Posted by Mark Finkelstein on August 7, 2006 - 08:10. A price spike 32 times larger than the proportion of oil production lost? It's what NBC's Ann Curry imagined on this morning's Today show. 'Soaring Gas Prices' is one of the Today show's longest-running hits. This morning's episode brought us Ann Curry trying to induce CNBC financial reporter Ron Insana to paint the gloomiest possible picture in the wake of the news that BP has shut down an Alaskan oilfield. BP shut the Prudhoe Bay field indefinitely due to the discovery of severe corrosion and a very small spill from a Prudhoe Bay oil transit line. The 400,000 represents 8% of US domestic oil output and about 2.6% of US supply, including imports.
Curry: "First - new fears of a spike in gas prices now that BP is shutting down their oil field. Ron Insana is here to explain what it means. Major developments?"
Insana: "Absolutely. If you think about the size of this shut down and what it means to the world oil market. 400,000 barrels a day are coming off line. 2.6% of US oil consumption. While we worry about disruptions from the Middle East because of what is going on between israel and lebanon, this is a disruption at a time when prices are already high."
Curry: "Overseas markets $77. Higher?"
Insana: "Absolutely."
So far, so fair. Clearly the loss of 400,000 barrels a day is not good news. But it was then that Curry started pushing the envelope.
Curry: "How much? $10 [per barrel]?"
And understated Insana: "In a single day that would be a lot."
I'll say! As mentioned, the 400,000 barrels represents only 2.6% of US supply. But remember - the crude oil market is international. The lost 400,000 represents less than 0.4% of total global daily crude oil production of about 84 million barrels. Yet Curry was envisioning a 13% price increase! Now, it's true that negative events can disproportionately impact prices. But by a factor of 32 times?
Ann wasn't done: "What about the economy? What happens to oil affects the economy?"
Insana: "If it's above the $78 a barrel level, gas prices will go up. Retail sales could be hurt and the consumer will get pinched more. It could slow down an already weaker consumer whom we have seen stop spending at walmart and restaurants because they are feeling the pain at the pump."
Curry saved her fondest wish for last: "A game changer in the economy?"
Ron played along: "Yes. Because it puts more pressure on the inflation picture. It may keep the Federal Reserve raising rates longer. That's an open question. If it slows the economy too much, it may take the fed out of the game and rates may come down."
Curry wasn't finished beating the higher-prices horse: "One way the economy is [slowed] is the price of gas. What do you think will happen to the price of gas?"
Well, Ann, what do you think would happen to price of gas if your prediction of a $10/barrel increase in the price of crude came true?
Curry closed by telling Insana to "come back when you have good news." Somehow you sensed she didn't mean it.
As I recall, most of the Alaska pipeline was built with an expected lifespan of about 30 yrs., which seemed very far off in the late 60's/early 70's.
Weren'tt they also saying that our oil would run out in 1990 or 2000? They probably figured they had the system beat ;)
There's apic of a pipe section on Drudge right. Completely shot. They will replace 73% of the pipeline. Going to be closed for a loooong time!
from reuters "Democrats call on Congress to probe BP shutdown"
Bush's fault!
--this shutdown is not likely to be a plot by BP to drive up prices, as some are asserting here--
Hear now this, O foolish people, and without understanding; which have eyes, and see not; which have ears, and hear not.
Jer. 5:21 KJV
--why would BP need a pretext to withhold oil from the market to raise prices? Just do it--
Such a bonehead move would only inflame public (and congressional) passions against the oil industry further. The oil industry still has not forgotten the late, great, conservative senator Henry (Scoop) Jackson, who suggested back in the 1970s that the oil industry be nationalized. From his lips to Gods ears, as the saying goes. Anyhow, this gives BP a pretext to shut down the pipeline in the name of preventing an oil spill that would harm Mother Earth. Clever!
Uh-oh, if I read the story on Drudge correctly, they haven't even pigged the line, and I'll bet they will find more damage.
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