September 02, 2005
Katrina aftermath: good news with the bad
Some sanity was restored to gasoline markets today, in which patches of good news allowed a more level-headed assessment of the size of the logistical challenges ahead. Both hope and despair can be found on the human dimension of the problem as well.
Yesterday's new policy announcements on the SPR and fuel standards were certainly welcome news. Outside the Beltway (cross-posted in Deinonychus antirrhopus) also finds a lot to be cheered by in today's news:
The Colonial Pipeline is back online. This is good news as far as getting gasoline out of the New Orleans area. The Capline pipeline also resumed operations on Wednesday as well. The Valero St. Charles refinery has restored power and a quarter of the workers there have returned. Also, Chevron's Pascagoula, Miss. refinery has avoided catastrophic damage, but is still offline. From what I've read Port Fourchon and the LOOP are also not nearly badly damaged as were feared and the biggest hurdle appears to be getting electrical power restored. In fact, the LOOP restored pumping operations yesterday.
Fistful of Euros also notes that Germany and Spain are about to send us some gasoline from their emergency stockpiles. Please remember that, fellow Americans, the next time you want to gripe, "why didn't they help us when..."
The market seemed more impressed with the good news than the bad, with October crude futures falling $2 today to under $68 a barrel and October gasoline down 22 cents a gallon to $2.18. Panicked drivers who filled their tanks at $5 or $6 a gallon got what they deserved, since this kind of behavior makes any problem much worse-- if a large number of drivers decide that their tanks need to be full rather than half-full, that produces a huge surge in demand that would put a strain on the system even if there was no supply problem at all.
Although the logistical problems with fuel supply are amenable to rational plans for coping, I can't help but feel frustrated by the slow progress within the city of New Orleans itself. I'm haunted by the words of Kash at Angry Bear: "These do not sound like stories written about the United States." And of course, the stories themselves are indisputably haunting.
One of the questions I want to ask is how much sense it makes to be herding people like cattle or refugees into the Superdome and the Astrodome. Surely a superior vision would be if those without relatives or friends might be dispersed and welcomed in twos and threes into individual homes across America; I suppose the tricky issue there is how to make sure that the visit is strictly temporary. It appears that HurricaneHousing.org, a civic action arm of MoveOn.org, is by far the most organized here, where you can click on one button to volunteer your home and click on another to get placed into one. They claim to have over 60,000 beds available as of the time of this writing, and the number seems to grow by another 1,000 every time I click for an update. Related opportunities either to offer your home or to find a place to stay can be found at Katrinahome.com and Craigslist.org, while Dignan's 75-year Plan apparently plans to have a similar effort operational this weekend. Hurricaid.com may prove to be a useful clearing house for resources for hurricane victims.
I salute all of you who have taken such steps of incredible generosity.
Posted by James Hamilton at September 2, 2005 03:42 PMdigg this | reddit
Listed below are links to weblogs that reference Katrina aftermath: good news with the bad:
» A remarkable city responds as Katrina's economic ripples ease a bit from Houston's Clear Thinkers
In the chaos of the worst natural disaster of our time, the remarkable Houston community provided extraordinary relief for tens of thousands of New Orleans area evacuees and, in so doing, provided a substantial part of the calming effect that... [Read More]
Tracked on September 3, 2005 10:28 AM
» Katrina: 7 days of hell from SciGuy
One week ago Katrina had just finished pounding the U.S. Gulf coast, and for a time it appeared New Orleans had escaped the worst. That proved, sadly, untrue. A few thoughts as we try to get through this tragedy ...... [Read More]
Tracked on September 5, 2005 03:22 PM
Possible the oil market is also anticipating a recession (and destroyed demand from both that and the now carless and jobless refugees, with or without recession).
Posted by: M1EK at September 2, 2005 04:33 PM
It is amazing that such a widely anticipated event met with so many systemic failings, at least in terms of evacuation or lack thereof.
Have the disaster gurus thought to interview alot of people PRIOR to an event to determine what the population does or does not understand and what their reactions would be ?
Posted by: biker at September 2, 2005 05:12 PM
When I worked in the coffee imports trade in the 1980's, New Orleans was the most important port of entry in the USA, with LA second. No doubt it has retained that status. From a purely economic POV, I would expect such a critical region to be better prepared for the potential disaster which unfortunately occurred. Of course that's easy to easy to say. In reality, boarding up windows doesn't provent a house from being knocked down. What could have been done? Or could be done in the future?
Posted by: Art Segal at September 2, 2005 05:48 PM
Could $2.18 futures prices for October also be predicting extreme market-tampering like price-caps, rationing, overzealous "gouging" prosecutions, etc.? Presumably, if those policies were to be implemented it would be much less profitable to own a gallon of gasoline in October and it would fetch a lower price. Is that accurate?
Are $2.18 futures prices necessarily a good thing?
Posted by: Hunter at September 2, 2005 05:51 PM
Hunter, I should clarify that the NYMEX futures contract is for the equivalent of bulk gasoline, which is significantly below wholesale, and without the 40 cents or so gallon retail tax that you probably pay in your state. For comparison, it was about $1.50 back in July. So not to worry-- you won't be paying $2.18 at the pump any time soon!
Posted by: JDH at September 2, 2005 06:24 PM
Something that we need be aware is that maybe NO city cannot mantain the oil and the port (grain exportation) working fully operational. If there are no houses and if they will need weeks or maybe months to dry the city maybe will be not possible to have enough workers to operate the refineries and the port at full capacity. And I think that some people will be so scared that simply will quit the city and go live at other place...
NO infrastructure is pratically all destroyed. There are no shops, no food, no restaurants, no sewage, no drinkable water, no (intact)houses there. If they don't dry the city fast maybe be possible that other problems happen, for example it is possible that mosquitoes spread and mosquitoes have the bad habit to transmit diseases.
My guess is that the port and the refineries will need 2-6 months to return to full capacity. But it is possible that need a full year. Not only gasoline shortage will be a problem to economy, but grain exportation will be not so good because there is no cheap way to export the grains (the cheapest way is use the Mississipi river).
Other thing that need get to mind: sooner or later OTHER class 4-5 hurricane will hit NO. That isn't a "if" but "when"... (sorry if I appear be a doomsayer... but this time is better be preparated).
There is time to make the levees ready for a class 5 hurricane? There are money to start these projects?
Katrina not hit NO directly. If a class 4-5 hurricane hit NO directly the disater can be worse. Only the lake levees were damaged this time, but if the RIVER levees get damaged it is possible that the river simply change localization...and all port and refineries infrastructure need be moved to where the river goes...
Yes, rivers have the bad habit to move to other places...
Sorry the bad english, my native language is portuguese.
Posted by: Joćo Carlos at September 2, 2005 07:34 PM
I'm going to say something really radical and outrageous. Yes, in the natural course of events New Orleans is likely to be hit again with a cat 4 or 5 hurricane. But it is not likely to happen for many decades, just as it has gone so long without being hit.
Before that time, decades or centuries away, I think it is likely that we will acquire the ability to control and steer hurricanes. There was an article about this in Scientific American a while back, http://www.sciamdigital.com/browse.cfm?sequencenameCHAR=item2&methodnameCHAR=resource_getitembrowse&interfacenameCHAR=browse.cfm&ISSUEID_CHAR=E9FFCBE6-2B35-221B-661ED2EFA6A79697&ARTICLEID_CHAR=EA12417C-2B35-221B-6D7042670B738FFD&sc=I100322
"But must these fearful forces of nature be forever beyond our control? My research colleagues and I think not. Our team is investigating how we might learn to nudge hurricanes onto more benign paths or otherwise defuse them. Although this bold goal probably lies decades in the future, we think our results show that it is not too early to study the possibilities...."
Posted by: Hal at September 2, 2005 08:20 PM
"I'm going to say something really radical and outrageous. Yes, in the natural course of events New Orleans is likely to be hit again with a cat 4 or 5 hurricane. But it is not likely to happen for many decades, just as it has gone so long without being hit."
Sorry, but currently there are at least one hurricane class 4-5 almost each year. So, it is problable that other hurricane hit New Orleans at some few years.
From Nature (http://www.nature.com/nature/journal/vaop/ncurrent/abs/nature03906.html)
"Increasing destructiveness of tropical cyclones over the past 30 years
Theory and modelling predict that hurricane intensity should increase with increasing global mean temperatures, but work on the detection of trends in hurricane activity has focused mostly on their frequency and shows no trend. Here I define an index of the potential destructiveness of hurricanes based on the total dissipation of power, integrated over the lifetime of the cyclone, and show that this index has increased markedly since the mid-1970s. This trend is due to both longer storm lifetimes and greater storm intensities. I find that the record of net hurricane power dissipation is highly correlated with tropical sea surface temperature, reflecting well-documented climate signals, including multi-decadal oscillations in the North Atlantic and North Pacific, and global warming. My results suggest that future warming may lead to an upward trend in tropical cyclone destructive potential, andtaking into account an increasing coastal populationa substantial increase in hurricane-related losses in the twenty-first century."
The data show that the hurricanes are geting worse each year.
Sorry my bad english, my native language is portuguese.
Posted by: Joćo Carlos at September 3, 2005 04:48 AM
people are now asking what will happen to the people that have been moved from new Orleans to Houston and other points, there are reports that those cities are now having a myriad of problems including increases in crime
and what of the next tier people? meaning the tellers, waiters, pizza makers and others who live from paycheck to paycheck; they drove somewhere what will happen to them?
And how well are you prepared? Remember the power outage some years ago and how the system was going to be overhauled? Even if you think you are insulated from a natural disaster once the power grid goes down for a week or two you are in trouble. And lastly how successful do you think Bush will be in his next "request" for monies for Iraq?
Posted by: leiax at September 3, 2005 10:34 AM
My intuition is that:
1) hurding people into the superdome and civic center was an idea that will have to be studied during calmer days. Commandeering robust buildings in the high ground and having many slightly spread-out smaller clusters of refugees would (I'm guessing) have resulted in more property loss but also would have simplified subsequent supply drops, evacuation, and public health issues. The astrodome will probably work out better if it is truly temporary.
2) Wide, "in 2s or 3s" dispersal of refugees is probably a poor idea. It invites exploitation of refugees by hosts and greatly complicates the work in months to come of interfacing refugees to FEMA and other service agencies. The moveon.org thing seems to me somewhere between well-meaning but naive and just outright grandstanding, if your description of it is accurate.
Posted by: Tom Lord at September 3, 2005 03:08 PM
Chevron's refinery may be down for awhile ... but they are pumping 300,000 gallons of gas per day.
I believe you noted earlier that refiners were increasing their inventories of gasoline? If so, looks like they may be coming in handy now ... although we don't know how long they can go without production.
As an aside, conditions right along the Gulf Coast are really quite terrible, from what I understand. The same article linked above discusses dysentery and disease problems in Biloxi. We have a long way to go ...
Posted by: Victor at September 3, 2005 08:10 PM
Victor, refineries had increased their inventories of crude oil but decreased their inventories of gasoline before Katrina hit.
Posted by: JDH at September 3, 2005 09:23 PM
Many thanks for the correction. I should have checked your older posts before asking. ;)
A future post idea to educate us ... how do EPA regulations generally affect refinery behavior? I see from Calculated Risk's DOE graph that the average inventory of gasoline drops from June - Sept. anyway. Did the change in regs effectively devalue existing low-RVP inventory? Do firms generally try to hit zero inventories by Sept. 16 when the RVP standards pop back up? (and is this date the same this year as it usually is?) In other words, by this time, would that particular Chevron refinery have already been pumping solely from inventory while they retool for winter gas production? Perhaps I should not have been surprised by that revelation.
Has Katrina possibly delayed the transition process for the refineries that are shut down?
Lastly, what would a refiner's / retailer's optimal strategy to the EPA waiver be? Can we really expect the waiver to significantly impact prices in the short-term, especially given the fact we already are at the end of the season? It also seemed like paperwork was required. Is that also a deterrent, or is that just a pro-forma sort of thing?
Obviously I am not terribly familiar with this market, but I do admire your blog's educational value.
Posted by: Victor at September 4, 2005 07:26 AM