Thursday, September 29, 2005

Temporary energy relief in the wake of Katrina, Rita may be fleeting

"Although not as well publicized as are the other energy derivatives, natural gas may be in the worst shape of all. With no overseas imports available as of now, the winter season is already threatened by major shortages. And with most of Europe competing with the American Northeast for natural gas, there are no additional reserves to tap. In addition, natural gas is second only to coal as a power source for electric generators. Ironically, a swing from electricity to natural gas for heating was due to the manipulated prices of electricity a few years ago. Also playing a part is the continuing lack of nuclear power, which barely generates 20 percent of America's power supply today.

Despite reassuring statements from Saudi Arabia and other Mideast OPEC nations that they're pumping to the maximum and prices will come down due to a potential oil glut, this simply is not true. Spare pumping capacity from OPEC, which controls 70 percent of the world's alleged oil reserves of 1.12 trillion barrels, is at a low ebb. No new reserves of major consequence have been discovered in the past 30 years. Also, depletion has exceeded new discoveries by a two-to-one ratio during this time period. In addition, both China and India are on the way to rivaling the huge oil demand now emanating from the American consumer within little more than a decade.

What is true in the Saudi statements is America's unconscionable lack of refining capacity. Not one U.S. -based refinery has been completed since 1976, and a disproportionate percentage of those in existence are located along the vulnerable Texas/Louis-iana Gulf Coast.

To add insult to injury, only 20 percent of the global 80 million barrels of oil produced today are light, sweet crude, which is easily refinable. The bulk of oil from the Middle East requires a much more intense refining process.

Consumers may have temporarily dodged a major bullet in the wake of the twin hurricanes. But, the most crucial period of energy cost and availability crises are yet to befall America in the days ahead."

No comments: