POSTED: 8 SEPTEMBER 2008 - 7:30am EST

Hurricane Gustav update

image above: Louisiana National Guard resting at Morial Hall on 9/1/08. by National Geographic

Coup de Grace:
compiled by Jame Kunstler on 4 Sept 2008 at

Grid down & many turned back at checkpoints
by Dale Lezon & Dane Schiller on 3 September 2008 at

The state's power grid sustained massive damage from Hurricane Gustav, officials say, and it could be weeks before all of it is repaired. Frustrated motorists poured back into the state hoping to return home, only to be turned back at checkpoints on all the major highways. Many grew frustrated as they roamed the state like gypsies or sat in motels they could scarcely afford, their cash running low and no way to get more.

Across the state, more than 1 million people were without electricity, which meant gas stations were unable to pump fuel, ATMs could not dispense money and restaurants could not open to feed people still unable to return home. Communication was made difficult by spotty cellular and Internet service.

Over 90% of oil & gas ouput idled by Gustav
by Bloomberg News  on 3 September 2008

About 96 percent of crude-oil production in the Gulf of Mexico and 92 percent of natural-gas output remains halted because of Hurricane Gustav, the U.S. government said.

Energy producers reported that 91 rigs and 599 production platforms still are evacuated due to the storm, the Minerals Management Service said today in a statement on its Web site. About 1.2 million barrels of daily oil production remain shut-in, along with 6.7 billion cubic feet of gas.

For additional info, go to THEOILDRUM.COM



POSTED: 3 SEPTEMBER 2008 - 7:30am EST

Gustav slams Gulf oil facilities

image above: Mars natural gas platform damaged in huuricane Katrina

Hurricane destroys oil infrastructure; oil price falls
By Richard Heinlberg on 2 September 2008 in

Sometimes you just have to stand in awe and wonder before the all-knowing wisdom of The Market. Common sense would say: Hurricane Gustav (even considering the fact that it never achieved its advertised category 4 status before landfall) is likely to result in 40% of US Gulf of Mexico oil production being taken off-line for 30 days, with longer outages for some rigs, terminals, and refineries; therefore, given the fact that fuel supplies in the US are already tight, this is a good time to load up on oil futures.

But Noooooo. That’s not how the market works. Because the expectation of storm damage was higher, Monday’s trading was actually dominated by a sell-off.
This tells us just how important the market and price signals are in helping us prepare for the inevitable decline in world oil production. To wit: not very.

When the oil price was above $140 and commentators were forecasting a continuing spike up past $200, it was easy for Peak Oilers to feel vindicated and to hop on board the giddy Ferris wheel ride. Newspapers, television, NPR—everyone was talking about Peak Oil.

But now as the oil price drifts toward $110 or maybe $100—even though this is still a historically high price range—the excitement is over. Page views on Peak Oil websites have fallen. All that talk of the party being over was just so much scaremongering.

The price of oil is a single number. The media want information that can be summarized in a short phrase. But reality is complicated. World oil supply is only understandable in terms of the production histories of dozens of countries, thousands of oil fields, and decades of trends in discovery and depletion.
Moral of the story: In the task of waking humanity up to the plight of resource depletion, the market is not very helpful, even if it occasionally does give useful warning signs. It’s a bit like the broken clock that tells perfect time twice a day.

by James Kunstler on 1 September 2008 in

As I write at 6:30 Eastern Daylight Time, Hurricane Gustave grinds out of the Gulf of Mexico to make landfall on the Louisiana Coast at Port Fourchon, the marshalling yard for the oil and gas industry -- where the oil companies move people and equipment to the rig zone offshore. The storm spent the wee hours of the morning chewing through a wad of offshore drilling platforms and, perhaps more importantly, the Louisiana Offshore Oil Port (or LOOP), where all the oil supertanker ships from Middle East come to offload their cargos. It will probably be days before we know what was chewed up out there -- not to mention the spaghetti-like network of pipelines that run all over the shallow bottom to carry the oil and gas from the platforms to the refineries just up the Mississippi corridor between New Orleans and Baton Rouge.

So, at this hour nobody knows yet what the outcome will be, either for the city of New Orleans and its suburbs, or for the oil and gas industry. My guess is that enough oil and gas will come off-line, be shut-in, or get disrupted to severely affect the normal operations of America for a couple of weeks. At the least, our just-in-time gasoline and diesel supply system will take a forced time-out. Those refineries on-shore are in the path to get hit. If they are damaged then we'll probably see shortages of motor fuels all over the eastern US.

If we see a shortage of motor fuels, we may also get a disruption of trucking for the just-in-time food delivery system that keeps the supermarkets stocked. So, there is a possibility that Americans will experience both fuel and food shortages this back-to-school week -- and in some places it may be the not-back-to-school week if there is any trouble getting fuel for the yellow bus fleets. There has also been chatter about possible far-reaching damage to the old-and-fragile electric grid if this storm trips just the right switches, but that's in the category of idle talk for now.

All the above is unknown so far, and I won't even venture to guess what may happen in the city of New Orleans itself -- except that the morale of its citizens must be badly strained as three years of re-building gets undone and the long-term future becomes an even more dubious proposition.

Projected damage estimates on CNN early this morning ran into about the $30-billion range. This hit, and the potential disruptions to the everyday economy, could be the shot that finally pushes the long-teetering banking system over the edge. Surely the insurance industry, which is tied to banking and its worthless alphabet securities, will not be in position to cover all its billions of dollars in payouts.

This may be what finally stops the game of musical chairs in which insolvent banks pretend to be capitalized by showing up for loans at the Federal Reserve's teller cages. For instance, when last seen before the Labor Day hiatus, Lehman Brothers was desperately scrambling for life-support from anybody and anything with a few billion spare bucks. As the hiatus ends and real-life reasserts itself, Lehman may finally find itself free-falling into the abyss, and the chain of mutual obligations, cross-collateralizations, and Ponzi plays connecting it to the other banks could break, bringing on a domino fall of insolvent banks and institutions.

All the hurricane action has come at a bad time for the Republican Party. The roll-out of John McCain's ridiculous and cynical choice of a running mate, complete with pompom pumping cheerleaders, will remain front and center in the public's consciousness now while the party delegates go through a few procedural motions in Minneapolis -- taking it light on the funny hats, and the other usual festive hijinks, which would only seem indecent against the background of a profound natural disaster. Despite the poll numbers currently showing a fairly close race between Obama and McCain, the Republicans are well on-track to being regarded as "the party that wrecked America." So it's fitting that their quadrennial meeting should be solemn and restrained.

This official last day of summer, Labor Day Monday, with roughly twenty percent of America's oil production getting chewed up, and the financial markets shut down, and the public in other places than the Gulf states kicking back with weenies and burgers, or watching the hurricane on TV, may be the last day of seeming normality in this country for quite a while to come.

I will come back to this week's blog later this afternoon or evening when more is known about the outcome of Hurricane Gustave.

Update, 7:30 p.m. Eastern Daylight Time, Sept 1:

Hurricane Gustave has now moved away from New Orleans and is stumbling northwest through the backwaters of louisiana toward Texas. Damage to the city of NOLA seems to be minimal at this time. But there is something very strange about coverage coming across on the cable news networks.

While trumpeting the "dodged bullet" story-line, and the triumph of post-Katrina government bureaucracy, there have been absolutely no reports of what's happened to the oil-and-gas platforms offshore, the Louisiana Offshore Oil Port (LOOP), or the tangle of pipelines running along the sea floor from these things to the onshore terminals and refineries. I'm quite sure we will not get any comprehensive news about these things for days, because it will require a huge effort of up-close inspection.

Gustave roared over that area as a category three storm. It is possible that a great deal of damage has been sustained and that we may still look forward to trouble with gasoline, diesel, and methane gas supplies in the weeks ahead. Playerz on the oil-and-gas futures markets must have been watching CNN and MSNBC all day -- and have no idea whether we actually have a problem out in the rig zone.

see also:
Island Breath: Peak Global Economy 7/29/08
Island Breath: Fannie Mae & Freddie Mac Mess 7/14/08
Island Breath: The Perfect $torm Approaches 6/28/08
Island Breath: Report from the Bank of Banks 6/28/08