The Peak Oil Connection

Obviously our main concern is for the people that have had their lives destroyed by Katrina, but there is also a secondary concern: the economic fall out caused by this storm. One thing I haven't seen mentioned in the mainstream press is the obvious problem of peak oil coupled with the devestating impact this storm has had on the Gulf regions ability to produce, refine, and transport energy. Michael Rupert over at FTW has been writing about this for some time and it's no surprise that some of the best commentary I've found on this issue was found there. According to the story found at Bloomberg.com about 91% of the region's oil production has been shut down.

``There isn't the global spare capacity out there to replace this loss if it continues for a prolonged period,'' says Bart Melek, a senior economist at BMO Nesbitt Burns in Toronto. ``Already the market is tight as a drum, and if anything else happens, say instability in the Middle East, I wouldn't preclude $100 oil at all.''

Spare capacity is the key. We have none. We're already seeing the initial spike in gasoline prices. Last night when I filled up it was $3.01 a gallon. I keep hearing again and again that $4.00 a gallon gas is right around the corner. But it's more than just gasoline prices. A story in CNN/Money by Chris Isidore points out:

Real estate and home construction, trade, agriculture and livestock -- even the purchasing power of the dollar -- are all likely to be impacted by the storm in the coming months.

This storm is going to impact our entire economy. According to Mike Rupert we have lost somewhere around 25% of our energy production and it's hard to tell if and when it will ever be rebuilt. He speculates that we will not regain pre-Katrina energy levels in this country. If he's right, we're all in some serious trouble.

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