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Despite the recent growth in gasoline prices, which has triggered intervention by the government for refineries to forego minor maintenance in the coming weeks and to relax regulatory standard, and despite and the pretty gloomy assessments from the Department of Energy, which now forecasts oil prices above 70$ this winter and above 60$ next year, I think that the oil/gasoline situation is not the real danger for the US economy.

The real danger comes from two other places:

  • natural gas
  • the loss of the port facilities around NO

Oil and gasoline

On the oil front, prices have subsided in recent days, as the release of volumes from the SPR and the slow return to production of Gulf of Mexico facilities continued (yesterday, 860,000 b/d, or 57% of GoM production, was still down).

On the refining side, about 1 mb/d of capacity will be down for a long time, and some additional capacity will require a few more days to get back in line (see the detail for each refinery from the Dept. of Energy - 5 page pdf) but the help from European countries, that have provided gasoline from their own strategic reserves (2mb/d for 30 days) has allowed the crisis of the last few days to subside. The White House has also taken advantage of the situation to relax safety and environmental rules:

Bush calls for US refiners to boost fuel output

The White House has told US refiners to postpone all scheduled maintenance in a drive to maximise petrol and diesel production as the administration raised its oil price forecasts on Wednesday in the wake of Hurricane Katrina.

A senior executive from a big refinery in Houston said: "The message from the government is, `Run the refinery as high as you can and avoid all the non-priority maintenance in the next four or six weeks'."

Washington has also told refiners to stop producing ultra-clean diesel to increase petrol output.
A Louisiana refiner said: "The White House said, `Forget about [ultra] low-sulphur diesel. We need gasoline and diesel. We need you working 100 per cent'."

New regulations on producing ultra-clean diesel were due in January 2006 but are now likely to be postponed, refiners said.


But postponing maintenance, during which a refinery runs at reduced capacity, can be a costly and dangerous gamble. Some of the industry's worst accidents have been blamed on such delays.

Jamal Qureshi, market analyst at consultancy PFC Energy, said: "It does expose the potential for safety problems. But you don't have a choice."

Still the decision can be understood, as the missing capacity will ensure that the situation remains tense in a worldwide context of high capacity utilisation. HiD, our most knowledgeable kossack on the topic, is pretty upbeat as we come out of the driving season, so I will defer to him on this.

the Department of Energy has nevertheless increased its forecasts for future oil and gasoline prices:

US raises winter oil forecast to near $70

The US government yesterday raised its crude oil price forecasts for this winter to near $70 a barrel, and above $60 a barrel for 2006, and said US energy expenditures for 2005 would reach their highest level in 18 years.

The US Energy Department said that the jump in oil, natural gas, petrol and heating oil prices would increase this year's national energy expenditures to 8.3 per cent of gross domestic product, up from a 6.2 per cent in 2002. "Dramatic increases in domestic energy costs, assisted by everything from tight world oil markets, to blistering summer heat, to the ravages of Hurricane Katrina, have made for an exasperating summer for many consumers and have set the stage for a potentially expensive winter heating season," the department said in its monthly markets report.

Note that this figure of 8.3% of GDP was last seen during the 1979 oil shock, so we ARE entering oil shock territory, and this increased spending on oil, gasoline and heating oil will put a drag on UC consumers' purchasing power.

Natural gas and power
A good chunk of this increase comes form the natural gas side. This is usually either mixed together with oil, or ignored altogether. As I wrote in my earlier economic summary, this is important because natural gas prices effectively determine electricity prices, with a lag. Coal fired and nuclear plants are cheaper, but they are online pretty much all the time and the price for electricity is determined by the price for additional capacity, which comes today almost exclusively from gas-fired plants.

Natural gas prices jumped by more than 25% from an already high level, and have not gone down back to their pre-Katrina levels:

A lot of gas-fired plants have been built in the past 15 years, and the general expectation was for gas-prices in the 2-4 $/mbtu range (that made prices similar to that of coal-fired plants). Now that gas costs 3-4 times more, power prices are set to increase by 50-100%. It won't happen overnight, as there are long term supply contracts in place and regulated tariffs, but it will trickle through in the coming months (unless regulators block retial prices, in which case utilites will be squeezed between higher wholesale prices and lower retail prices, triggering a new Californaia-like crisis).

Gas prices put focus on US strategy

Natural gas prices yesterday kept close to the record levels reached after Hurricane Katrina, sparking worries of higher heating bills this winter for consumers and increased costs for the chemical and power generation sectors.


The role of natural gas in the US energy balance has increased in recent years. Last year, gas represented about 25 per cent of primary US energy consumption - the same amount as coal - compared with about 39 per cent for oil, according to the latest BP Statistical Review of World Energy. (...) Natural gas is the main feedstock for the petrochemical industry, and also affects electricity prices, because much of the US electricity supply comes from gas-fired power generation facilities.


"As if the [natural gas] market wasn't tightening already, Katrina now makes the natural gas balance look ridiculously tight," said Jay Saunders of Deutsche Bank in New York. (...) The production loss hit at just the point of the year when natural gas storage injections traditionally rise to help offset the peak demand of the coming winter season.

Analysts already saw the spot market as bullish before Katrina: injections into storage were already 12 per cent below the average for the last three years.

Gas prices were already very high before Katrina struck, and the loss of both production capacity from the Gulf of Mexico (4 billion cubic feet per day, 40% of GoM production or roughly 10% of US consumption) AND the apparent long term loss of processing capacity in Louisiana (5 bcf/d - see the same source above) ensure that the market will be even tighter. And no help can come form abroad, as the only way to carry natural gas across oceans is in the frm of LNG, and the US only has 4 import terminals, already used at full capacity. Canadian imports already provide more than 20% of US demand and cannot grow enough either.

So expect what are VERY HIGH gas prices to remain, and to slowly feed through pwoer prices and industrial prices. This will hurt consumers, and it will hurt industrial producers unless they can pass these price increases through. So expect lower profits or inflation, or both. Retail electricity prices could also rapidly become a hot political issue as utilities grapple with vastly more expensive wholesale prices and have to decide to pass these on to consumers or lose money.


But the biggest worry by far comes from the literal disappearance overnight of the Port of South Louisiana, the largest commercial port in the USA and the 5th largest in the world. The LOOP, the offshore oil terminal seems to be coming back to normal, and the river facilities of the Port of New Orleans (on the Mississippi river) seems to be starting some operations again (6 page pdf), but the overall transport node seems GONE.

A very important stratfor article was already diaries a few days ago, but is worth mentioning again:

The ports of South Louisiana and New Orleans, which run north and south of the city, are as important today as at any point during the history of the republic. On its own merit, the Port of South Louisiana is the largest port in the United States by tonnage and the fifth-largest in the world. It exports more than 52 million tons a year, of which more than half are agricultural products -- corn, soybeans and so on. A larger proportion of U.S. agriculture flows out of the port. Almost as much cargo, nearly 57 million tons, comes in through the port -- including not only crude oil, but chemicals and fertilizers, coal, concrete and so on.

A simple way to think about the New Orleans port complex is that it is where the bulk commodities of agriculture go out to the world and the bulk commodities of industrialism come in. The commodity chain of the global food industry starts here, as does that of American industrialism. If these facilities are gone, more than the price of goods shifts: The very physical structure of the global economy would have to be reshaped. Consider the impact to the U.S. auto industry if steel doesn't come up the river, or the effect on global food supplies if U.S. corn and soybeans don't get to the markets.

The problem is that there are no good shipping alternatives. River transport is cheap, and most of the commodities we are discussing have low value-to-weight ratios. The U.S. transport system was built on the assumption that these commodities would travel to and from New Orleans by barge, where they would be loaded on ships or offloaded. Apart from port capacity elsewhere in the United States, there aren't enough trucks or rail cars to handle the long-distance hauling of these enormous quantities -- assuming for the moment that the economics could be managed, which they can't be.

Go read the rest, and go see this Los Angeles Times article from yesterday which begins to illustrate the same point. Companies are currently scramblingto organise alternatives, and use the stocks they have, but soon, major economic disruption could become visible.

The power and transport stories may not be as visible as the oil and gasoline situation, but they are just as dangerous for the economy and potentially a lot more disruptive on the long run.

Originally posted to Jerome a Paris on Thu Sep 08, 2005 at 04:01 AM PDT.

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Comment Preferences

  •  Tip Jar (3.97)

    European Tribune - bringing dKos to Europe
    in the long run, we're all dead (Keynes)

    by Jerome a Paris on Thu Sep 08, 2005 at 04:00:09 AM PDT

  •  Got wood? Increase of $1000 per household (4.00)
    According to a CNN report cited here, they are estimating the rise in heating costs could amount to as much as $1000 per household.  With stagnant incomes and soaring insurance premiums (to cover Katrina losses), many will be squeezed far beyond what a zero-savings country can afford.

    There has never yet been an oil shock that was not followed by a recession.  This one will be no different.

    Batten down the financial hatches.  This storm is far from being over.

    "Americans can always be counted on to do the right thing - after they have exhausted all other possibilities." Winston Churchill

    by LondonYank on Thu Sep 08, 2005 at 04:12:43 AM PDT

    •  Nothing against solid fuel furnaces (none)
      But they need more care and attention than gas and fuel oil.  We had a dual fuel(solid fuel/natural gas) furnace that was pretty nifty.  Once they drilled a NG well on our property we hooked up a line and had free NG!  No more cutting wood.  But that was my childhood home, I'm not so fortunate now.
      •  I burn coal here (none)
        I had heard of burning coal, of course, before I came to Britain, but never knew anyone to actually do it in their homes.  Here it's normal - except in London where it's still banned (caused the horrendous fogs you read about in Sherlock Holmes and killed hundreds a year through the 50s).  I can't quite get used to coal smoke as an appealling smell, although the British rate it as high as I do wood smoke.

        I miss having a wood fireplace, though.  I spent many happy days as a kid cutting up firewood  when school was cancelled following big storms.  

        "Americans can always be counted on to do the right thing - after they have exhausted all other possibilities." Winston Churchill

        by LondonYank on Thu Sep 08, 2005 at 05:57:15 AM PDT

        [ Parent ]

        •  love a coal grate (4.00)
          nothing like backing up to a fire with a lump of burning coal the size of your head with a pint of mild in hand.

          Once you learn the tricks of starting it up, coal is great.  But can you imagine the air in a big metropolis like NYC?????

          •  Coal is crap... (none)
            One of the most disgusting and polluting things to burn.  If people are really burning coal to heat their home, they need to get into the modern era.  There may be some excuse for burning coal in China and the third world, but not in a modern country.  I don't care if coal is cheaper than NG either.  It's dirtier and completely carcinogenic.  It's bad enough when it comes from a power plant, but at least that is somewhat scrubbed.  

            In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

            by Asak on Thu Sep 08, 2005 at 07:21:11 AM PDT

            [ Parent ]

            •  Europe has had a lot of problems (none)
              with natural gas explosions.  I had a german friend who couldn't believe we used gas, "What? In your house?  It will BLOW UP!"
            •  Don't they now construct (none)
              very clean, efficient coal fired power plants?  I ask because a friend here who is a strong advocate for dam removal (to assist salmon runs) has argued far and wide that the new super-efficient, super-clean coal burning power plants should replace the dams.
            •  you're right (none)
              can't argue.  No way it can be tolerated on a wide scale.  I just liked the 6-800 year old pub in my wife's village.  Her house had nat gas for real heat.  The coal grate was really too much of a pain in the ass so down the pub with everyone else.

              I've seen the air at lake tahoe looking pretty foul with wood smoke too.  There's just too many of us now to go back to 1850.

              I'm pushing my coop as hard as I can to get some windmills up NOW.  And haven't succumbed to the heat/humidity and installed AC.  Just sit by the window and fan..

        •  yech! (none)
          Wood smoke is much better than coal smoke, especially if the wood is seasoned and dry for max BTUs.  Besides wood is naturally low in sulfur - one of the things that makes coal smoke so acrid.

          I still am not a big fan of wood smoke.  Two house fires will do that to you.

        •  "smokeless coal"? (none)
          What happened to the "smokeless coal" they used to sell back in the mid-80's when I was living there? I have no idea if it really should have been classified as "smokeless", but it was what we used in our flat for heat, along with the very expensive to use electric (portable) radiator for the bedroom.

          "The only thing we have to fear is fear itself." - FDR

          by Vitarai on Thu Sep 08, 2005 at 09:19:24 AM PDT

          [ Parent ]

          •  I burn smokeless coal on my narrowboat (none)
            because it's moored in central London.  It smokes a bit, but much, much less than house coal.  

            It's lovely to be on the boat on a cold day with a hot coal fire in the cast iron stove.

            "Americans can always be counted on to do the right thing - after they have exhausted all other possibilities." Winston Churchill

            by LondonYank on Thu Sep 08, 2005 at 12:01:46 PM PDT

            [ Parent ]

    •  Got flood insurance? (none)
      Most people in New Orleans did not have flood insurance, so they won't be seeing a dame.  Same is true for most of Mississippi affected by the twenty plus foot storm surge.  There are going to be hundreds of thousands broke and homeless.
    •  I am not saying (4.00)
      that the oil situation will not hurt, I am saying that the natgas and port are even worse...

      Does that make me an optimist?!

      European Tribune - bringing dKos to Europe
      in the long run, we're all dead (Keynes)

      by Jerome a Paris on Thu Sep 08, 2005 at 06:36:44 AM PDT

      [ Parent ]

      •  Natural Gas up 71 percent? (none)
        Yup.  That's gonna bite.

        No disagreement here that the oil can be imported - at a price - but the gas is going to be very tight indeed.

        Going to be interesting times in the economy soon.

        "Americans can always be counted on to do the right thing - after they have exhausted all other possibilities." Winston Churchill

        by LondonYank on Thu Sep 08, 2005 at 07:05:47 AM PDT

        [ Parent ]

      •  great post (none)
        As always Jerome - another detailed great post. I wish you had good news to report, but I can't expect that given the circumstances...

        "The only thing we have to fear is fear itself." - FDR

        by Vitarai on Thu Sep 08, 2005 at 09:21:39 AM PDT

        [ Parent ]

    •  Yes I do (none)
      I was just checking my woodpile in fact!  I won't be turning my furnace up above 55 this winter, and will be doing my best to keep it and the gas stove off by using our woodstove.  Our neighbors heat their whole house with a pellet stove, I expect they're feeling smug, reading the paper this week.

      Too many of my working poor neighbors heat with oil though, and it's going to be a chilly winter.

      "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

      by sarac on Thu Sep 08, 2005 at 06:38:46 AM PDT

      [ Parent ]

      •  Long underwear (4.00)
        not the bulky, scratchy kind of oldtime ridicule. Silk, under day clothes. Warm and weightless. Lets you keep the thermostat at 55 without shivering. See Winter Silks and L.L. Bean. Probably lots of others with similar products I don't know about. If you're in/near Madison, I understand Winter Silks has a retail outlet store.

        Of course, all these folks get their silks from China, so who knows what will happen to the prices?

        Death has a tendency to encourage a depressing view of war. -- Donald Rumsfeld

        by Mnemosyne on Thu Sep 08, 2005 at 07:02:04 AM PDT

        [ Parent ]

        •  Couldn't live without my (none)
          Winter Silks undies - but sometimes have to top them with the heavier cotton long underwear...

          If I am still cold then, I go split wood for the stove.  Surest way to warm you up.

          However thanks to global warming or something, SD was not very cold last year and I never got past the Winter Silks.  

        •  Have a drawer full (none)
          And sweaters, and shawls, and I drink a lot of tea!  Last winter my baby and preschooler were sleeping in triple layers plus blankets and down comforters.

          I haven't had the heat up over 55 in my bedroom at night since I've had my own place, except for the first three months after each of my babies were born.  During the day, I need it warmer for the baby, who is well dressed but also on the floor most of the time.  'Warmer' = 65.

          "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

          by sarac on Thu Sep 08, 2005 at 10:50:24 AM PDT

          [ Parent ]

      •  wood pellets (none)
        are a very sensible and environmentally friendly alternative to burning cord wood.  Smoke/ particulate emissions are practically non-existent. The problem is the initial cost of a pellet stove is significantly more than a good old log burning stove.  
        •  ay, there's the rub (none)
          Pellet stoves, solar panels, on-demand water heaters, efficient new major appliances - money money money.  I price them, sock away a little each month, and hope for windfalls.

          The clothesline in the basement was cheap, though!

          "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

          by sarac on Thu Sep 08, 2005 at 10:53:43 AM PDT

          [ Parent ]

    •  Fortunately, I do (none)
      And the weather is cooling off to the point where cutting it up isn't the express lane to heat exhaustion.

      Got way too much pine, though. Gunks up the chimneys; I think I'm just going to mulch it.

      Hatred is murder (1 John 3:15)
      You can take a break from politics, but life just keeps a-comin’.

      by dirtroad on Thu Sep 08, 2005 at 07:08:55 AM PDT

      [ Parent ]

  •  Natural Gas (none)
    has always had me concerned, but I'm still amazed at the rapid rise in price.  Excellent diary as always.

    Have you ever been in a Port when they bring a LNG tanker in, it is rather frightening.  

  •  I've been wondering (4.00)
    when the reality of this would begin to be discussed. Since no one is really talking about the port do we have any idea how badly it was damaged and when, if ever, it will be back to it's pre storm capacity?  And as the refineries, port, and oil rigs are put back into operational mode who will be working there?  Didn't most of the employees leave and even if they want to come back to work is there anywhere for them to live?  Are there any services available for them to use--ie grocery stores, medical facilities...?
    This entire response seems so disjointed with little or no thought given to consequences of the immediate actions taken. I hope that someone is paying attention to the logistics here but given the performance we've seen over the past two weeks I fear that this too will be a disaster.

    "Do Iraqi children scream when the bombs fall if no one is in the White House to hear them?" Bernard Chazelle

    by dmac on Thu Sep 08, 2005 at 04:25:46 AM PDT

    •  highway damage is another factor (4.00)
      From what I have read, I gather that there also is significant damage to the highways that lead to the port.

      I used to live in the United States of America. Now I live in a homeland.

      by homeland observer on Thu Sep 08, 2005 at 04:29:51 AM PDT

      [ Parent ]

    •  Saw a report (none)
      last night on Dow Chemical.  They're bringing in trailers for 7,000 or so of their workers.  The campground owner is happy to have them there.  The two couples they interviewed were happy to still have a job and willing to stay in the trailers.  One guy said his daughters were excited about camping :-)
      •  Which means... (none)
        you'd better pray fervently that no tropical cyclones, even just weak tropical storms, come anywhere near SE Louisiana now.  Because even a tropical storm can overturn a trailer. What will happen to all that temporary housing if they get hit with another one?

        People should not be afraid of their governments. Governments should be afraid of their people.

        by viget on Thu Sep 08, 2005 at 09:01:11 AM PDT

        [ Parent ]

  •  Widening Circles (4.00)
    The loss of the Port of South Louisiana will indeed have an impact on the U.S. economy. Since it will be difficult to export agricultural products, the U.S. market will be come glutted. The resulting lower prices for raw agricultural products will put a sqeeze on farming profits without creating much benefit for U.S. consumers. Meanwhile, if the price of agricultural products increases elsewhere, that may lead to higher prices for consumer goods imported into the U.S.

    In addition, a large number of jobs have been wiped out. Those displaced by Katrina may become the new equivalent of the "Okies" who were driven from their homes by drought and dust storms.

    Higher prices for energy and for imported goods, combined with anxiety about future employment, could lead to a decline in sales and consumer confidence.

    Thus we see the potential for widening circles of economic impact -- and the hurricane season has not yet ended.

    I used to live in the United States of America. Now I live in a homeland.

    by homeland observer on Thu Sep 08, 2005 at 04:26:28 AM PDT

    •  LA Times article says its at 85% now (none)
      Perhaps katrina is a protectionist?  Imports at the PNO are halted while exports from the PSLA are almost back to full capacity.

      Might and Right are always fighting In our youth it seems exciting. Right is always nearly winning. Might can hardly keep from grinning. -Clarence D

      by Myrkury on Thu Sep 08, 2005 at 06:15:48 AM PDT

      [ Parent ]

  •  well said (4.00)
    I've been thinking about this for a few days. All the grain from the mid-West goes thru the port of New Orleans. You can sit on the banks of the Mississippi River and see 20 barges floating by, loaded with corn or soybeans. Where will this grain go? There are not enough trucks in the US to make up the difference in carrying capacity.
    We must get the port on line.
  •  Dead On (4.00)
    Once my typical greedy compatriots get over the Colonial pipeline induced panic and that there will be enough mogas for our cars, they're going to realize just how ugly pricewise this winter is going to be to keep warm and the lights on.

    Heating oil will be available, just expensive as hell. We have enough money in this country to pull it away from other locales and it's easy to transport.  But Nat Gas -- we are hosed.  

    Losing those 5 or so big Nat Gas processing facilities is a HUGE problem.  I've designed bits of those.  They aren't all that complex, but without them, raw production gas with a bunch of H2S just isn't usable and there's no waiver the EPA can offer to make it so.  h2s = death, and damn quick.  They shouldn't be any harder to get back than a refinery (actually less) but it's still probably 2 months if all the electrical equipment is drowned.

    I wouldn't call my opinion on the refining situation exactly upbeat unless you compare mine to some of the wrist slashing diaries.  We will not run out of mogas and the world will not collapse, but no one will enjoy the price.  I just paid $3.35 and it's not like Hawaii gets mogas from Louisiana.  I'm guessing we trade down a bit but not much until those 4 units start taking feed again. (Oct futures trading about $2.10 so about $2.75-$3 at the pump on average).

    I'm pretty disappointed the early optimism re Pascagoula is proving to be misplaced--should know better than to believe PR flacks.  That 325 MBD unit probably produces nearly as much mogas/diesel/jet as Alliance and Chalmette combined (unless those 2 have gotten a lot more complex in the last 10 years).   I'd guess all 4 are back around Thanksgiving, but it's going to be a mess.  Especially with 4 companies fighting for the same gear.  

    •  Natural gas (none)
      Maybe I misunderstood you.  I live in what used to be one of the major natural gas beds in the country.
      Now I know a number of people that have gas wells on their property, they all have some allotment of free natural gas usage on their property.  This is done at least in some before the gas from the well enters the system, I don't know it for all, but I know it as a 100% fact that some are burning gas that just came out of the ground. And they have done so for decades.

      So this causes me to ask is there something wrong with the gas under the GOM?  

      •  all gas ain't the same (none)
        some wells require no treatment.  Others, especially ones producing sour crude and gas together can have a ton of h2s in them.  
      •  H2S (none)
        If the gas is associated with oil deposits and the oil has H2S (which is the definition of sour crude) then the gas does too.  And humans cannot tolerate any H2S, you could kill yourself with a stove burner.

        And if you burn sour gas in a furnace, you get sulfurous and sulfuric acid in the exhaust, which totals your typical furnace pretty quickly.

        •  yep (none)
          Sour crude has a lot of sulfur buried in the liquid organic molecules too.  Those big, complex refineries spend a fortune removing it.
          •  Interesting side note then (none)
            Our natural gas is clean but our coal is overloaded with sulfur.  Odd thing how one hydrocarbon is inundated with sulfur yet another hydrocarbon from the same area is clean.  Probably some logical explanation for it all, just seems odd from a non technical side.
    •  Where do they get the skilled labor? (none)
      It's not like the U.S. has built a lot of refineries in the last couple of decades.  How big is the pool of qualified welders, pipefitters, etc, they can draw on?
      •  not a problem (none)
        what's broken doesn't need welders.  They need electricians.  It's the electronic controls, pump motors etc that are screwed from being soaked in salt water.  Also a lot of insulation to be replaced.

        The pipes/reactors are in all likelyhood fine.  If they were messed up, the refineries could be down for several years.  You don't just whistle up 3000 PSI hydrocracker reactors (foot thick steel).

        And while we haven't built any new grass roots units, there is a lot of ongoing maintenance and expansion that has taken place.  There will be enough staff.
        At $25/bbl margins, the CEO's will get down there to work.

        •  Good (none)
          Although if they use distributed digital controls and they spent any time underwater they'll have to just replace the control system.  Probably used motor vendors are doing a lot of business now.
  •  Largest port by what measure? (none)
    Tons carried? Ships handled? There are a zillion ways of chopping and sorting 'biggest' for ports. For a while both Hong Kong and Singapore were claiming to be the world's busiest container terminal -- Singapore handled more tonage through its terminals, and Hong Kong handled more cargo total, when mid-stream container handling (containers loaded from barges in the harbor) was included.

    In the future, everyone will have a blog, and none of them will be read. My unread blog will be Symmachus

    by gracchus on Thu Sep 08, 2005 at 05:24:35 AM PDT

  •  Jerome, I hope you won't object . . . (4.00)
    I am posting in its entirety, the extremely relevant and disturbing comments of Stephen Roach.  Many of you may know that Roach is the chief economist for Morgan Stanley. He has been been both pragmatic and deeply concerned about the state of the US economy for many years. His most recent writing (before Katrina, by the way) have taken on a new urgency. Katrina hastens this day of reckoning.

    Global: The Endogenous Oil Shock

    Stephen Roach (New York)

    In the macro world, strikes, wars, and natural disasters have long been thought of as classic exogenous shocks -- those out-of-the-blue disruptions that jolt economies and markets.  For stable economies, the impact of the exogenous shock is fairly predictable -- a temporary reduction in growth followed by the rebound of recovery.  Such are the impacts that are likely to follow from the devastation of America's Hurricane Katrina.  But the energy shock of 2005 may be of a very different breed.  It could well be an endogenous shock -- an unfortunate outgrowth of excesses that have been building in the macro system for a long time.

    The Federal Reserve has set the stage for this endogenous shock.  As it has supported the US economy from bubble to bubble, it has fostered a climate of excess demand and excess liquidity.  First equities in the late 1990s and now property -- the Fed has nurtured the steady transformation of an income-based US economy into an asset-dependent spending machine.  Belatedly, Alan Greenspan has finally paid lip service to the mounting perils of the Asset Economy.  In his recent swan song at Jackson Hole, the Fed chairman cautioned that "history has not dealt kindly" with investors (i.e., American consumers) who may have gone too far in "accepting lower compensation for risk" on their asset holdings (see "Reflections on Central Banking," August 26, 2005).  Even couched in all the oblique caveats so typical of Fedspeak, this is quite a confession.  The Father of the Asset Economy now fears he has created a monster.

    Those fears are well founded, in my view.  The tragedy is that the powers that be are only now just coming to this realization.  Alas, there has long been ample evidence that America's asset-dependent spending mindset has gone too far.  That's the message from unconscionably low saving rates -- now below "zero" for individuals (a record low of -0.6% in July) and at low single digits for the nation as a whole (on a net, after-depreciation, basis).  That's also the message from a gaping US current-account deficit -- a record 6.4% of GDP in early 2005.  Such excesses are further corroborated by an unprecedented debt binge by asset-dependent American consumers; not only has the household sector's outstanding debt risen by 20 percentage points of GDP over the past five years -- more than the cumulative increase over the preceding 20 years -- but debt-servicing expenses are near all-time highs in what is still a rock-bottom interest rate climate.  And if there was any doubt over the bubble-like underpinnings of the Asset Economy, the latest report on nationwide home prices says it all -- a 13.4% y-o-y increase in 2Q05, the sharpest increase since mid-1979.  Saving-short American consumers have gone deeper and deeper into debt in order to spend freely out of artificial purchasing power extracted from overvalued homes.  All that paints a very compelling picture of an excess-demand-driven US economy.

    The same is true of the case for excess liquidity.  In America's deregulated financial market environment, liquidity-related impacts show up less in the various gauges of the money supply and credit flows and more in the form of movements in real interest rates.  With the Fed maintaining a long period of unusually accommodative policy -- a negative real federal funds rate from late 2001 to late 2004 that has gone only barely positive since -- financial assets have been supported by a steady stream of "carry trades."  This, in turn, has created excess demand for a wide range of fixed-income assets in recent years -- further depressing intermediate- and longer-term interest rates and thereby boosting property prices and wealth-dependent consumption.

    It is the resulting excesses on the demand side of the US macro equation that have set the stage for an endogenous shock.   That's very much the case with respect to the oil shock of 2005.  Hurricane Katrina may well go down in history as the tipping point to another energy crisis.  But it is important to keep in mind that oil prices had already pierced the $65 threshold before this devastating natural disaster occurred.  The reason:  an unusually tight balance between long constrained energy supply and surging energy demand, with the latter well supported by the spending excesses of the Asset Economy.  In other words, had it not been for America's asset-induced spending binge, there probably would have been a greater margin between aggregate supply and demand that would have left prices of oil and other energy products on a very different trajectory.  With the United States still accounting for fully 25% of worldwide oil demand -- more than three times the share of China -- the impacts of excess US consumption on global oil prices can hardly be minimized.  The endogenous energy shock is very much an outgrowth of this phenomenon, in my view.

    Nor should the oil shock be treated as an isolated occurrence.  America's Asset Economy is perfectly capable of generating other endogenous shocks, as well.  The two most worrisome possibilities -- a bursting of the property bubble and a current-account crisis.  These are typically low-probability events.  But for an Asset Economy that has gone to excess, those probabilities are higher today than would otherwise be the case.  Of these two possibilities, a post-bubble shakeout in the US housing market is more worrisome.  The government's just-released report on 2Q05 home prices underscores why.  Not only is the nationwide rate of housing appreciation at a 26-year high, but fully 25 states plus the District of Columbia -- a grouping that probably accounts for at least 65% of the total market value of US residential property -- have experienced double-digit house price increases over the past year.  At the same time, for 55 metropolitan areas, house price appreciation has been 20% or higher over the past year.  As the housing bubble grows larger and covers more and more of the US, the perils of a post-bubble endgame for overly indebted American consumers grow larger by the day.  Such are the perils of an Asset Economy that has long gone to excess.

    The same would be the case with a US current account crisis.  All it would take would be a desire on the part of America's foreign creditors to seek compensation for taking currency risk -- or an inclination on the part of foreign central banks to diversify their official foreign exchange reserve portfolios that are so heavily over-weighted dollar-denominated assets.  Both of these possibilities are entirely feasible and not without important implications for the global economy.  In either case, the back-up in US interest rates that would arise from such a response would reverberate into other asset markets, especially over-valued residential property.  Here, as well, the shocks associated with such a scenario are very much an endogenous outgrowth of an Asset Economy that has gone to excess.

    The oil shock of 2005 now poses an immediate threat to the US and global economy.  The significance of that threat will only become apparent with the passage of time.  In the end, it is always the duration of any shock that matters the most in shaping macro outcomes.  But this oil shock did not exactly come out of thin air.  It was, in effect, set up by chronic excesses on the demand side of the US macro equation.  Such an outcome could have important implications for financial markets.  Fed tightening could be brought to a premature conclusion, as US monetary authorities pause to assess the damage from Hurricane Katrina.  In response, bonds could rally further and equities could sag under the weight of prospective shortfalls to corporate earnings.

    Endogenous shocks are of a different breed than the more typical exogenous disturbance.  They reflect systemic risks in economies that could well take a good deal of time to purge.  That was always the biggest risk for America's Asset Economy.

    by nyceve on Thu Sep 08, 2005 at 05:30:13 AM PDT

    •  I have known Roach for many years (4.00)
      I think he lost his mind sometime around 1998 and never found it again.

      He has been bearish on the markets and on the economy since the mid-1990s. He was briefly right about the markets in 2001-2 (even a stopped clock is eventually right), since then the markets are up more than 50% and Steve has remained devoutedly bearish and totally wrong. I am surprised he still has a job.

      When it comes to the financial markets, follow his advice at your own peril.

      •  I disagree with you completely (none)
        I would say Mr. Roach will be proven totally accurate.

        The markets may be up 50% (BTW, which market are you referring to?), but IMO the housing market will collapse and bring down the entire economy which is essentially a ponzi scheme.

        by nyceve on Thu Sep 08, 2005 at 06:18:50 AM PDT

        [ Parent ]

        •  The stock market (none)
          as measured by the SP 500 bottomed in July 2002 at 775, today it stands at 1230, that is a 58% increase.  During the entire period, Steven Roach was bearish, warning his clients that the sky was about to fall. He was wrong then, and he is wrong now.

          As to the housing market, you have the cause and effect backward. Housing markets weaken only when local economies weaken. Houston in 1982, Boston in 1989, Denver in 1984, L.A in 1992 all saw sizable declines in home prices after the local economies went bust. You will be hard pressed to find a single example of falling home prices bringing down an economy.

          Far from a Ponzi scheme, the rise in home prices represents the working of a market, higher demand due to cheap money, and favorable demographics coupled with limited supply due to land use limits, or in areas like New York City, simply a lack of land to use.

      •  The DOW has been flat for (none)
        the last five years.  What market?
        •  The Dow is no longer a very good measure (none)
          of the stock market. It is 30 stocks, all large companies, and actually it has been fluctuating between 9500 and 11500 since 1998.

          What I was refering to was the SP 500, a much better measure of the market which bottomed in July 2002 at 775 and now is around 1230, a 58% rise, not counting dividends.  Roach was bearish during the entire period. If you had followed his advice, you would have been in short term Treasuries and earned about 3% per year on average.

          If I was a client and I got a 3% return when I could have had a 58% return, I would be unhappy to say the least.

          •  Few people would have timed it properly (3.50)
            And most are still down about 10% since 2000.  While Roach's advice may not be 100% accurate, if you'd taken his advice in '98 and switched to treasuries, you'd be far ahead of where you'd be if you were 100% in stocks.  

            I'm sorry, but I also have to say that your reply here is one misleading piece of crap.  The 58% return is for more than one year, but ignores the losses incurred in the two years before that.  Then the 3% you sight would only be the 1 year's worth of interest.  And by it being so low I guess it must be extremely short term treasuries????

            Just as a comparison, for the past 5 years the US bond market as measured by the Lehman Brothers Aggregate index has returned 6.5% annually.  The US stock market as measured by the S&P 500 has returned -2.26% annually.  

            If you timed the market and bought in at the right time in 2003, you've seen some very good gains.  Unfortunately, I guarantee that most people just followed the widely touted "buy the index and hold" strategy and have yet to see any gains for the past several years (discouting DCA or other periodic purchases, of course, but unless one's portfolio is quite small in comparions to such contributions, the impact won't be that massive).  

            The real question in my mind is when the S&P will achieve new highs.  At this point it looks unlikely to me that it will happen until 2007 at the very earliest, and that's assuming we don't have a recession and bear market before them.  

            In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

            by Asak on Thu Sep 08, 2005 at 07:47:17 AM PDT

            [ Parent ]

            •  Just sold an S&P 500 index fund (none)
              Just sold off my holding in an S&P 500 index, after being surprised it didn't take a dive after Katrina, and after reading too much of the analysis here.

              As for Roach, back when I was a journalist in the retail industry a decade ago there was no other economist in as high repute among the big retailers. But I think there are two kinds of economists: those who understand the fundamentals of the real economy, and those who are good at predicting the shorter term trends and styles among gamblers in the markets. Roach, I'd venture, is the first, not the second sort.

              On a side note, most of American retailing is far from Wal-Mart, and should be recruitable to Democratic causes. There is an intense movement towards better, more humanistic treatment of both employees and customers among most of the large retailers. They spend literally hundreds of millions a year bringing in consultants to educate their staffs towards these ends. They also realize that a population without well-distributed financial resources isn't a good customer base (unless they're Wal-Mart -- they hate Wal-Mart as much as any of us).

          •  When Bush took office it was 1,342.90 (none)
            at yesterday's close it was 1,236.36.

            That's flat, or worse, in my book.

            •  We weren't talking about Bush (none)
              we were talking about Steven Roach.
              •  I'm talking about flat market, (none)
                it seemed like a good starting point to show the market isn't surging.  You said Roach has been doom and gloom since '98 but the market has improved during that time.

                It hasn't improved since '98 either. You chose the absolute bottom to claim the market is improving, but you haven't established a long term trend, so what is your point?

                •  I think you should go back in read what I wrote (none)
                  My original point was that the market had rebounded sharply over the past 3 years, up a total of 58% during at time that Roach has been consistently bearish and wrong.

                  He was also wrong about the 1996-2000 time frame as well.

                  •  You also complained he (none)
                    has been doom and gloom since '98 but selectively chose only a part of that time to prove him wrong.

                    It doesn't make your point. That is unless your point is that the stock market is as logical a place to keep your money as in a coffee can buried in the yard.

              •  the point you miss (none)
                is that you are taking narrow trends within narrow slices of time and using that to make a narrow point.

                Put the whole picture together. Inflation, Debt, Pricing Structures, Earnings, Jobs, Savings, and what you get is a slow decline from a high standard of living somewhere in the 1960's, to a third world nation somewhere around 2050.

                Steven Roach is the informed voice of the slow decline of the American Age of Empire.

                Sure, you can eke out whatever little gains you may, but in the long run your are losing your ass, and no slicing and dicing of time frames and stock prices will be able to counter the larger picture.

                The short form:

                An American family should be able to support two kids on a single income minimum wage job, end of story. If that is not being done, then America is going down the toilet, really fast.

                So anyway, after taxes inflation, the rise of commodity prices, and the rise in cost of the standard of living, are you better off than you were ten years ago? Are you working less and getting more for your money? If you can answer yes to these questions, then good for you, but realize that you are answering yes at the expense of several billion (several million of which are American citizens) people who do not have, and probably never will have, that luxury.

                Steven Roach paints with a broad brush, and the short sellers have made a serious killing by reading into his words. His work is for the pros to decipher and finds the trends from, and those who outright dismiss his work do not truly understand the underpinnings of the market. Nor do they see and where the smart money is being made.

                So on the whole:

                Pros are making millions by knowing how to read him.

                Everyone else is less than breaking even.

                The GOP and the Elephant are both Introduced Species

                by roboton on Thu Sep 08, 2005 at 01:01:21 PM PDT

                [ Parent ]

                •  Steven Roach (none)
                  is a Chicken Little Sky is Falling Wall Street shill. Don't dress him to be more than he is.

                  When has a single minimum wage job in this country EVER supported a family with two kids. Your sense of entitlement is breathtaking and naive. Wages at the end of the day reflect the value created by the wage earner.  If the minimum wage was set at your standard, all you will do is guarantee unemployment or off the books employment for those who can not produce that level of value due to a lack of skills, experience or education.

                  The fact that the rest of the world does not enjoy the standard of living that we do is not the fault of the United States. The misery of the billions you mention is due to the miserable political leadership they have. Sixty years ago Japan was a smokey pile of rubble, today it is the second strongest economy in the world. Why? Because they had enlightened political leadership that valued hard work, and education.

                  As to the short sellers who listened to Roach, they have lost their shirts, These people are traders not investors. Go look at a chart for the SP 500 or any comparable stock index over the past 3 years. They are all up. Anyone who has been on the long side of the market has done well, short sellers have been burned.

      •  Daisy..... (none)
        Roach is commenting on macroeconomic factors that are indeed relevant to what is going on today. He is not trying to predict where the stock market is going to be in a year or two.

        And just because the stock market has risen off the lows does not mean he is in any way wrong. He is right or wrong because his reasoning is right or wrong over the longer term, not because the markets go one way or another in the short term.

        There has been impressive profit growth over the last couple of years but it has been achieved largely through productivity gains, i.e. by extracting more and more from labor. This is an unsustainable way to increase profits over the long haul.

        The market has not woken up to the financial risks that exist in our super juiced up, cheap money economy. The fact that consumption has been supported by borrowing is a fact of life, one that will probably lead to considerable pain if and when the cheap money environment ends.

        His reasoning makes sense from a historical perspective and those that think we are in for a financial boom and invest accordingly are the ones that are going to be losing a lot of money over the next several years, IMO.

        •  Roach works for a brokerage firm (none)
          His job is to help clients make sound investment decisions since the summer of 2002, he has been totally and completely wrong about the economy and wrong about the financial markets. The same was true about his bearishness from 1996 to 2000.

          Whether he is right or wrong about the future, remains to be seen.

          •  Well (none)
            The decision by Greenspan to flood the market with cheap money, and to encourage Bush in his tax cuts, could not have been rationally predicted, yet it has given the economy a few more years of artificial buoyancy. But artifical it is, and it will be all the worse when it stops.

            European Tribune - bringing dKos to Europe
            in the long run, we're all dead (Keynes)

            by Jerome a Paris on Thu Sep 08, 2005 at 12:53:42 PM PDT

            [ Parent ]

    •  No objection! (4.00)
      Count me as a Roach fan. a number of my earlier diaries are based on his work or similar in thinking.

      European Tribune - bringing dKos to Europe
      in the long run, we're all dead (Keynes)

      by Jerome a Paris on Thu Sep 08, 2005 at 06:41:20 AM PDT

      [ Parent ]

  •  Stock Market (none)
    Since the weekend leading up to the impact of Katrina, I've been keeping my eye on the US stock market, in particular, the DJIA.  It seems like the job loss, the port loss, the export loss, the higher energy costs, should have had a negative effect on returns from industrial activities.  But the rise in the DJIA totally confuses me.  Is this simply the broken-window fallacy magnified by a kind of irrational exuberance?  It would seem to me that a catastrophe like this would make bonds more attractive, potentially luring investors away from stocks?  Maybe most investors don't care about NOLA?  Maybe "industry" means Microsoft and Intel not ADM and Alcoa? Any insight would be greatly appreciated.
    •  I am wondering the same thing . . . (4.00)
      Believe me, I am not wearing any tin foil but. . .I just can't figure it out.  

      And I'd really like Jerome to explain.

      Is it as simple  as that the market thinks the Fed won't raise rates? I think the inflation situation is far worse than slowing economic growth, so I think rates are bound to go up.

      So, Jerome, why is the market going up? What's going on here?

      by nyceve on Thu Sep 08, 2005 at 05:46:16 AM PDT

      [ Parent ]

    •  The stock market looks forward (4.00)
      what we see is today's disaster, what the market sees is the Fed stopping its interest rate hike campaign and the Federal government spending $60+ billion on reconstruction.

      What is not to like in that picture?

      •  The eventual insolvency of the nation. nt (none)
      •  sounds about right to me (none)
        probably also short sighted. The impact of higher energy prices and disrupted commodity procurement and supply lines will be slow to appear, but very real and intense.

        European Tribune - bringing dKos to Europe
        in the long run, we're all dead (Keynes)

        by Jerome a Paris on Thu Sep 08, 2005 at 06:42:27 AM PDT

        [ Parent ]

        •  Grain prices have been falling (none)
          for most of the year. I thought that the supply chain disruption might give prices a boost, but that has not been the case.

          Again, Jerome, I think you are way to pessimistic here, the financial and commodity markets are bith saying the same thing: Katrina is not that big of an economic distruption.

          •  I have to admit (none)
            that the markets don't agree (yet?!) with me...

            The thing is, we don't know yet the operational status of the whole port infrastructure, and it is difficult to know when it will be back on line, and at what capacity. I am surprised that this seems to be so little written about (but then again, maybe I am not looking hard enough)

            European Tribune - bringing dKos to Europe
            in the long run, we're all dead (Keynes)

            by Jerome a Paris on Thu Sep 08, 2005 at 07:18:35 AM PDT

            [ Parent ]

            •  Maybe the stock markets are getting a little help. (4.00)
              •  I'd believe this... (none)
       there's been some question regarding the same sort of behind-the-scenes manipulation regarding the dollar and treasury securities as well.  I think Jerome diaried this before, but there's been an amazing (and mysterious) sudden increase in off-shore Carribean banking centers (read: hedge funds)Treasury holdings.  Some here speculated that these hedge funds are merely shadow intermediaries for diverting governmental holdings into the Treasury market, sort of like the rest of America, mortgaging your future to pay the bills today.

                I know this is kind of tin-foil hat stuff, but it is very very strange that these Carribean banking centers are suddenly such big players.

                People should not be afraid of their governments. Governments should be afraid of their people.

                by viget on Thu Sep 08, 2005 at 09:29:36 AM PDT

                [ Parent ]

            •  Jerome... (none)
              ...I'd say the markets still don't get it yet.  As Steve Gregory pointed out in his wunderground posts, he knew about the probable damage to oil infrastructure as early as 11 am on Friday August 26, and was able to cash in on some lucrative positions in NYMEX before the market closed that day.  The oil companies, relying on other meteorlogical consultants, missed the boat on it, not realizing until 5 pm the probable damage.  As a result, oil futures sagged on Friday, but we all know what happened on Monday.

              Brokers are humans too, and rely on much of the same sources as we all do.  But unlike blogs, they don't have the power of the "collective detective" (ePluribus is a perfect example of this), and often discount "fringe" stories or sources that might be very well right.

              Right now the financial press is ignoring the ports, they do so at their own peril.  And my conclusions regarding this whole mess is that no news is BAD news (whereas the prevailing opinion had always been the opposite).  We haven't heard much about the ports, which leads me to believe the situation is worse than others have let on.

              OTOH, the St. Louis's Post-Dispatch Washington correspondent reported yesterday that barge shipments up and down the Mississippi are starting up again and that the ports look pretty optimistic regarding grain shipments.  Since a good chunk of the STL economy depends on Mississippi river traffic, I tend to think his reports to be rather credulous.

              So who knows.  We'll certainly find out soon enough.

              People should not be afraid of their governments. Governments should be afraid of their people.

              by viget on Thu Sep 08, 2005 at 09:39:13 AM PDT

              [ Parent ]

      •  There's a lot not to like about the picture (none)
        And many investors are rightly concerned and confused by how the market has reacted.  Daisycolorado, I do have to say this, between you and Roach, one of you will always be right.  

        In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

        by Asak on Thu Sep 08, 2005 at 07:51:17 AM PDT

        [ Parent ]

      •  The investors that see it like that....... (none)
        are like the chess player that looks out one move ahead and thinks they have it all figured out.

        The investors that look out two or three moves ahead are coming to an entirely different conclusion and are typically the "smarter" money. These would be the Buffetts and Soros' of the world.

        I guess it all depends on the perspective, if you are primarily short term trading oriented or more longer term investment oriented.

    •  stock market (none)
      Current estimates are that about $100 million from the insurance industry and eventually over $100 million from gov't will flow into Katrina relief and reconstruction which will be an economic stimulus.

      Despite the above, it's the current feeling on wall street that the Fed may slow down on raising rates for awhile until the impact of katrina on energy costs and consumer spending is clearer - and this is a positive for stocks.

      It may not be true but the official word coming from the Port is that damage is not signficant - just a matter of getting the energy and people in place, which is in progress.

      •  The US government (none)
        has already promised $10.5 BILLION, another $50 BILLION has been proposed. Estimates on the amount insurance companies will have to pony up run anywhere from $7.5 to $15 BILLION.

        All of which will have a very stimulative effect on the US economy over the course of the next year.

        •  This is common in the aftermath of a nat disaster (4.00)
          It's also basically irrelevant.  The amount spent rebuilding will more or less (if we're lucky) cancel out the economic damage of the hurricane.  The real issue is how the aftermath of Katrina transfers over into other sectors of the economy.  In that regard we have to worry about the impact of higher gas prices on consumer spending.  We also have to worry about a potentially weakening dollar, which will lead to inflation and higher interest rates.  If the housing market stagnates, as would be expected with higher interest rates, especially after the huge run it's gone on in the past few years, then that alone will probably put us into recession.  

          In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

          by Asak on Thu Sep 08, 2005 at 08:01:18 AM PDT

          [ Parent ]

      •  Insurance (none)
        Current estimates are that about $100 million from the insurance industry.

        First of all, $100 million seems small to me.  In any case, where is that $100 million coming from?  I had some silly idea that insurance companies invested a significant portion of their premiums.  In which case it would seem to me that payouts would require selling off some assets.  I don't know how this breaks down in terms of bonds vs. stocks for the affected insurers, but it seems like this could be significant - am I mistaken?

    •  A WSJ editorial board stooge... (4.00)
      ...on Diane Rehm this morning said that the markets respond mainly to the price of oil, and that the markets were very encouraged that oil prices didn't rise as much as expected, thanks to the releases from the SPR in the US and Europe, among other things.

      This seems like circular logic to me, but I present it for what it's worth.

      In Iraq, it's a dry heat. And the language that none of our troops or diplomats speak is Arabic rather than Vietnamese.--Daniel Ellsburg

      by ankylosaurus on Thu Sep 08, 2005 at 08:18:41 AM PDT

      [ Parent ]

  •  heating costs for the next few years (none)
    A friend of mine must either replace her oil-burning furnace this month, or convert to natural gas. Which is likely to go up in cost faster, oil or gas?

    If I can't dance, it's not my revolution. -- Emma Goldman.

    by DoctorScience on Thu Sep 08, 2005 at 05:42:48 AM PDT

    •  coin flip (none)
      but I'd go electric if it were my money.  Heating oil and gass are finite resource.  Electricity generation at least has options.  (and they are cleaner/less maintenance says the man with no HVAC at all besides a window and fans.)

      If either heating oil or gas, I'd go gas.  the gas companies must cover home heat before industrial users get their slice.  And a lot of liquified gas coming to market in the next decade.

      •  I would not recommend electricity... (none)
        Electric heaters are horrendously inefficient in comparison to heaters that burn petroleum.  Electricity is simply not an effective way to heat compared to combustion.  Don't get an electric heater unless you want to burn a hole in your wallet trying to use it.  

        In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

        by Asak on Thu Sep 08, 2005 at 07:54:00 AM PDT

        [ Parent ]

        •  Efficiency (4.00)
          Well, technically electric heaters are 100% efficient. And, if it doesn't get below freezing much where you are, at moderate temperatures electric heat exchangers run more than 100% efficient (they're pulling heat from the outside air is why). High-end oil furnaces can get you up to about 92%, and older furnaces, well-tuned, are in the low 80s.

          So it really depends on the electric rates where you are. In New England, for instance, at last year's prices it electric heat would cost almost twice what oil does. At current prices electric is still more expensive. But if you're in Washington State where there's cheap hydro-electric -- well buring oil would be silly.

          If your household wiring is up to modern standards, and you pay attention to putting each heater on a different circuit, you can do well with the better electric space heaters (such as the oil-filled models) for a lot less than a new central furance -- if you want an electric option. Leaving aside the inefficiencies of generation and distribution (line loss), 100% of the electricity that reaches them goes into heat. But again, it's the relative cost per BTU that matters.

          Then again, with space heaters you can better adjust the heat for just where you are in the building.

    •  Depends on where you live. (none)
      I suspect if heating oil  is even an option, you're in the northeast, in which case both fuels will rise, thought there's no question that natural gas is going to go up in price faster, and in a more sustained fashion - there is a rigged national market (just ask the CFTC & FERC), and north America is basically out of natural gas anyway, for all intents and purposes. Natural gas won't be a real "free market" until LNG imports hit the coasts in a big way (5-10 years out), at which point the price is likely to stabilize at around $6/mmcf or so.

      A couple of options. Solar water heaters are very economical, and fuel cost is of course free; but depends slightly on the exposure of your friend's home. And the above poster is right - especially if your friend has the option of buying wind power from their utility, the electric heating option can be not only economical and efficient, but 100% environmentally friendly as well. If you're in the NE, your utility probably has an opt-in program for clean energy. Look into it.

      Better still would be investments in efficiency like high-e-value windows, energy star appliances and such; they're the fastest return on investment, have the most immediate effect on overall energy costs, and are completely immune to price fluctuations. Combining EE with renewables (solar heaters) or optional clean energy purchases from your utility are, by far, the safest, cheapest, most secure bet.

      I am the federal government.

      by mateosf on Thu Sep 08, 2005 at 09:25:27 AM PDT

      [ Parent ]

  •  Electricity (none)
    One last thing the EPA can do to ease the price pain of $11+ nat gas (equal to burning $66 crude oil for power).  They might waive sulfur emissions from older dual fueled generation that can burn fuel oil.  You may see decent volumes of LSFO or even HSFO burned for power again.  Some European countries were still burning 3% sulfur fuel in the mid 90's when I quit the biz (Ireland, Denmark on occasion, the UK very infrequently as gas was cheap, France--a little).  

    Italy got/gets a huge percentage of its power from burning 1% LSFO.  They used to be the largest buyer of petroleum in the world(after the US military).  The bos-NY-philly area has a bunch of plants that burn 0.3%, 0.6%, 1% etc.  Florida Power and Light also burns a lot of oil (or did as there didn't used to be a nat gas line down to Miami -- I'm out of date by 8-10 yrs).

    Too bad it's been 25 years since 1979.  The refinerys killed by the last price shock were set up to puke out tons of fuel oil just for this purpose.  Wonder if some bright spark will try to re-open BORCO -- 500 MBD piece of shit refinery in the Bahamas closed about 1989ish.  Probably rusted away by now.

    •  Probably gone now (none)
      We had two refineries in Buffalo, a Mobil and a Shell, that were good for high sulfur crude IIRC.  They were both mothballed at first but eventually scrapped because the corps did not want to pay the property taxes.  Would be nice to have them now.
      •  25 year old+ unts (none)
        are probably useless regardless.  Only thing worth having are the tank farms.  Those old beasts didn't have the energy integrating to make running them sensible once oil went through $10.....
    •  Do we really want (4.00)
      to go backwards on the environmental front now? I understand doing it for a couple of weeks, but with the Bush admin. You could expect these "temporary" waivers to last and last...

      European Tribune - bringing dKos to Europe
      in the long run, we're all dead (Keynes)

      by Jerome a Paris on Thu Sep 08, 2005 at 06:39:44 AM PDT

      [ Parent ]

      •  no, but (none)
        you can't have people freeze in winter.

        Hopefully there won't be a need to burn fuel oil.
        But if we have a super cold winter and there isn't enough gas to heat homes and keep the lights on, I know which way I'd vote were I in the USNE.

    •  This is a horrible idea and totally unnecessary (none)
      This idea would further punish the poor with pollution, as most power generation is located in underpriveleged areas in the first place. Sulfur dioxide is not an OK compromise.

      It also ignores the substantial gains that can be made - and very quickly - through rapid investments in energy efficiency. If the government were serious about saving natural gas (which this government is not, under ANY circumstances), they would earmark a billion $ - or two - for a national emergency energy efficiency program. We could cut national natural gas consumption by up to 1-2% in very short order, and if you understand the way tight markets work, you know that that kind of measure can have an incredible impact on prices.

      That doesn't even get to the issue of wind power, which reduces gas consumption - and generates power that's cheaper than the power from gas-fired generation. You can look it up.

      Like jerome said, give this administration an inch on the environment and we'll spend the next decade cleaning up their dirty mile.

      I am the federal government.

      by mateosf on Thu Sep 08, 2005 at 09:31:45 AM PDT

      [ Parent ]

  •  Ripple effects throughout America (4.00)
    I noted in an earlier post that the true economic impact of the loss of NO as the major shipping hub for goods would reach across the nation.

    The single largest port for south american goods - like coffee, lumber, cocoa, sugar, south american and gulf island communities fruits and vegetables - those things that run america - is being taken off-line and the capacities at other ports are not there to handle this shift.

    As gas and oil prices increase (upwards of 45% increase in Wisconsin), so will the goods/produce of south america.  As the shipping lanes contract and the input slows, prices will increase to offset the increases in gas/oil as well as the scarity of the goods.

    Once even working people see their budgets going to things like, heat and food, the optional spending - like dining out, vacations, extra cloths, ect - will go to cover these increases in daily living expenses.  As such, the spending at Christmas - just 90 days away - will be the worst in anybodies imagination.

    Lay offs from the poor sales at the holidays will trickle down to more production lay offs and the cycle will continue.

    It is a horrible but very predictable series of events.  Just like Katrina.  It's just a matter of time.

    •  However a lot of those can go to (none)
      Mobile, or Galveston, or Tampa. Not that far, still in the gulf.
      •  But none of them... (none)
        ...are at the mouth of the Mississippi River.

        From the days when Abe Lincoln rode the flatboats down to New Orleans to the present day barges and container ships, the Mississippi River is the nation's economic lifeline. To not have the port at its mouth in full working order is a bad situation.

        I'm not part of a redneck agenda - Green Day

        by eugene on Thu Sep 08, 2005 at 09:45:36 AM PDT

        [ Parent ]

        •  That's true (none)
          and that's the reason NO was there in the first place.

          It IS a bad situation. No doubt about it.

          I suspect the port and the roads to it will be the first things cleared, for precisely that reason. The  majority of the people can be moved somewhere else, but the port can't.

          There will need to be some housing close by for the worker there, where I'm not sure.

  •  70 laid off locally in W Pa due to Katrina (4.00)
    A steel processing plant that uses hydrogen for annealing and galvanizing (because it burns at a higher temp than natural gas) had to shut down those lines.  Their supplier of hydrogen, Air Products Corp., had their plant in Louisiana damaged in the storm; Air Products other plant, in Canada, is down for scheduled maintenance. It is expected that it could be up to 3 months before they can get the hydrogen again.  I understand that there is a mad scramble in the steel/steel products industry for this hydrogen.

    While the lay-off of 70 (out of a workforce of 200) may seem trivial, I suspect it would be repeated over and over across the country as part of unforseen disruptions caused by Katrina.

  •  If Bush had kept levee budgets in tact (4.00)
    with spending of $200M - 300M we would not be seeing this...

    "The Bush administration on Wednesday formally asked Congress for $51.8 billion in Katrina relief and recovery expenses, in addition to $10.5 billion already approved, calling it the latest installment -- but not the last".

    What a myopic miserable failure !!!

  •  energy prices (none)
    seem to be at least as important as the screwups in NOLA or Iraq to the average voter.

    Be a Carville, not a Colmes

    by seesdifferent on Thu Sep 08, 2005 at 06:05:27 AM PDT

  •  no help can come form abroad (none)
    We're on the exact same page Jerome.

    One note:

    Tanker capacity is at it's limit.

    There is no way to get extra gasoline to the US within three months.

    Demand Destruction must ensue.

    When wounded, the body essentially takes energy away from other parts of itself to restore order at the site of injury. In ordinary times, nations as "organisms" do this very well. But in this case the timing is bad, as energy is scarce anyway (the wound was incurred at the onset of what will soon become a global energy famine); the nation has already been hemorrhaging materiel and trained personnel in Iraq for three years; and the site of the wound couldn't be worse: it is in the part of the national body through which much of its energy enters (the region is home to half the nation's refining capacity and almost 30% of production). Thus it seems likely that the available energy may not be sufficient to overcome the entropy that has been introduced; rather than being contained and eliminated, disorder may fester and spread.

    PeakOil is here.

    New Orleans is the Prize.

    The Battle of New Orleans has begun.

    The MSRiver is the key.
    It doggedly wants to fall into the bottom of the Barateria-Terrebonne Estuary.  The Corps of Engineers is doing everything to stop that.
    New Orleans cannot be saved until the River is rerouted.

    Paradox on top of Contradiction.

    Paradox seems to allude to contradictory outcomes or effects from one source, one event; it implies movement in two different, opposing directions arriving at two distinct results.  This is troublesome to the rational, logical, and scientific mind, which believes itself capable of eliminating paradox, and thus contradictory results.  We in the modern world do not like the unpredictability associated with paradox; it erodes our faith in self-determination, of our control over a given physical, political, social, emotional, or cultural environment, the very real human fear of chaos.

    The River will move.  Decreasingly powerful storms will be able to do more damage to NO.  But we must continue to pour $ into NOLA.
    The US must have a port at the Mouth of the MSRiver.  But the people are gone.  And on and on.

    We're fucked Lock and Load.

  •  More playing with numbers: $3.33/gal gas (none)
    See this thread for appropriate disclaimers.

    OK- so the US is currently importing and using about 20 million barrels of oil per day, according to the Democrats.  This is back of the envelope calculations, so 20Mb/d is close enough.  So 1Mb/d is about 5% of our refining capacity.  Assume a "base price" of gas is $2.50/gal, i.e. that's what gas would be if it weren't for Katrina, and a price elasticity of 0.15.  Thus to effect a 5% reduction in demand, price would have to go up by 5/0.15 or 33.333%.  So $2.50/gal gas would go to $3.33/gal.

    Naturally, this is a simplistic analysis and not to be trusted.  Except to say this: I'm reasonably confident that $3/gal gas is going to figure large in our future.

    "History does not always repeat itself. Sometimes it just yells, 'Can't you remember anything I told you?' and lets fly with a club." --John W. Campbell

    by bhurt on Thu Sep 08, 2005 at 06:22:04 AM PDT

  •  oil demand (none)
    I would like to postulate that the demand for gasoline will drop a measurable amount in response to higher prices. This will take some of the pressure off home heating oil. Whether this will have an impact on the upcoming heating season I can't predict.

    My thesis is that, compared to the OPEC oil embargo, most families now have more vehicles. In those days the typical family had a single car. If it was a big sedan gas guzzler there was not much that they could do to lower their transportation costs.

    There was a small amount of ride sharing and many unnecessary trips were eliminated, but there was little to be done at the pump. Prices for full sized used cars dropped considerably as people tried to economize. Hondas were in short supply and commanded a premium.

    Now many families have several cars and often have an option as to which one to use. So they can put the SUV in the garage and use something else. There also may not be the same rush to trade in the gas guzzler, people can just stop using it in the hopes that prices will come down again.

    Neither GM, nor Ford has made any large scale changes to their product mix. They are both planning to phase in more efficient SUVs over several years rather than trying to respond to current events. Of course, they may not have much choice given the setup of their assembly lines.

    If my thesis is correct, demand will drop and this will somewhat ease the upward cost pressure. There will also be an economic recession as many of us have been warning, but that's a topic for another discussion.
    Here, if you are interested: Coming Crash

    Musings on Society: policies not politics

    by robertdfeinman on Thu Sep 08, 2005 at 06:22:34 AM PDT

    •  Also reducing trips (none)
      The numbers used to figure average daily trips per household have gone up over the last 10-20 years while the number per household has gone down.  Clearly we could reduce average car trips by 10% without any real effort.  If the price stays above $2.75/gal to the end of the year I think people will start to make long term changes to their lifestyles.  I think that part is all about people's perceptions as to the cost of gas.  If it drops a little and people say, 'See, it's not so bad,' then nothing will change but as I said we can wring out a 10% reduction in car use without much effort.  That would make up for a 5% reduction in production but it would be a near thing.  (I'm assuming transportation is about 50% of gas use.)
  •  What do you call an economy that... (4.00)
    exports agricultural products and imports finished goods?  Generally that's the definition of a 3d World economy.  Yes, I know that it would be a facile definition here given the large industrial capacity that our country still has, but it's a point worth pondering.

    It's also worth pondering the fact that an otherwise manageable natural disaster became an absolute catastrophe b/c of a lack of infrastructure spending and b/c of the total incompetence of the govt.  To put it bluntly, what happened in N.O. last week is something that one would expect to read about in some distant, impoverished, and hopelessly corrupt country.  The fact that it happened here says a great deal about how far this country has drifted in recent years.

    While the thousands of needless deaths are still the most worthy of attention, we should also view this tragedy as a metaphor for what has gone wrong for our nation as a whole.

    Some men see things as they are and ask why. I see things that never were and ask why not?

    by RFK Lives on Thu Sep 08, 2005 at 06:32:15 AM PDT

    •  Add to that (none)
      the increasing income gap between rich and poor, and the looting of the US treasury for the benefit of corporations who have bought politicians, and you're in third world territory.

      We're even dismantling environmental restrictions out of necessity.

  •  Jerome... (4.00)
    I think you are forgetting another huge factor.  I have a mother-in-law who owns a house on the Florida coast.  She simply cannot buy insurance right now because the house is over 40 years old.  She owns it outright, so she only needs liability, but if she were to take out another mortgage, she cannot get anybody to insure it against loss.  Also, there are some companies that are flat-out not insuring Florida real-estate at all.  If all of these people with their 1/2 million dollar McMansions can no longer get insurance or they have to pay through the nose for it, it is going to dramatically affect the value of that property.  We may be seeing a tear in the real-estate bubble.

    "[A] 'Sharecropper's Society' [is] precisely where our trade policies, supported by Republicans and Democrats alike, are taking us." - Warren Buffet

    by RichM on Thu Sep 08, 2005 at 07:17:11 AM PDT

  •  Venezuela inks oil deal with Caribbean nations? (4.00)
    Reported today is an oil pact between Venezuela and 6 or 8 Caribbean nations where Chavez will pick up 40% of the price of oil over $50.00 a barrel, with a re-evaluation when oil reaches $100.

    It seems that Chavez is serious about breaking oil links with the U.S. (I believe Venezuela is the world's 5th largest producer?), and I've seen another half dozen oil deals inked over the last six months: most recently between Russia and China and China and Iran.

    I'm not sanguine when I read these deals since it seems evident that the ROW (rest of the world) is moving to secure reserves not under firm U.S. dominance.

    Am I silly to be concerned about this movement?  And, will any of these deals impact the U.S. in the near term, like this winter with its looming heating costs?

    Your economic wisdom is appreciated.

  •  In addition to (none)
    the disruptions in north-south supply routes, there's the east-west factor. I-10 is badly damaged, and the bridge that disappeared last year near Pensacola is still being rebuilt.

    That, and I-40, are the two major interstates across country for trucking goods. Most of the food consumed in the eastern half of the country is trucked from the west coast.

    As it has become apparent in the last few days that the response of the Bush administration to this huge disaster is to do . . . nothing, except spin, bits of Yeats keep muttering around in my head:

    . . . Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,
    The blood-dimmed tide is loosed, and everywhere
    The ceremony of innocence is drowned;
    The best lack all convictions, while the worst
    Are full of passionate intensity. . . .

    Death has a tendency to encourage a depressing view of war. -- Donald Rumsfeld

    by Mnemosyne on Thu Sep 08, 2005 at 07:29:12 AM PDT

    •  I wouldn't say most of the food (none)
      but definitely a good bit of it. However, you don't have to go through LA to get to the east coast. You don't even have to go NEAR there.

      I don't think the roads that are out in that area will impact shipping to the rest of the country, and certainly not to the east coast. It WILL impact shipping to that general area though.

    •  I-10 and NOLA (none)
      are you just referring to the stretches that run through the city?

      if so it's not that big a deal because most people take I-12 which goes north of lake pontchartrain, bypassing NOLA.  it'll be congestted as all get out, but i think it's still OK.

      of course if you're talking about I-10 in MS or AL, that could be a serious problem.

      we'd better decide now if we are going to be fearless men or scared boys.
      — e.d. nixon, montgomery improvement association

      by zeke L on Thu Sep 08, 2005 at 11:25:47 AM PDT

      [ Parent ]

  •  Weekly Gas Storage is down (none)
    Minutes ago, the EIA released its weekly natural gas storage report.  For the week ending Sept. 2nd, a total of 36 Bcf was added to storage, compared to a typical amount of 60 Bcf for this time of year.  In the Gulf coast region, storage actually went down by 6 Bcf.

    This report only includes a few days of post-Katrina production, so we are likely to see an even weaker report next week.  Total stocks of 2669 Bcf are slightly above the 5 year average of 2547 Bcf, but another month of lost production would bring us down below average.

  •  LNG terminals (none)
    This will certainly tip the scales farther in the direction of allowing LNG terminals, such as Broadwater, a project of the truly devious TransCanada (we've been dealing with them here in Vermont lately) and the recently-caught-lying Shell.

    Short story is they're trying to skirt jurisdictional limits on such a development by putting a large, floating barge (size of the Queen Mary) in the middle of Long Island Sound, with underwater pipelines to carry the natural gas up the Hudson as well as into Connecticut. Reportedly the new federal energy bill will grease their way.

    Now, from an environmental point of view this is just plain evil. But from an energy and economic point of view.... My tendency is to fight this because I know from personal experience that TransCanada plays very dirty when it comes to local politics (maybe it takes that kind of company to get gas pipelines through -- their primary business). Still, is it this or burn a lot more coal -- also a very nasty alternative for teh environment?

    •  Huh? (none)
      Now, from an environmental point of view this is just plain evil.

      Why?  Are you objecting to the barge?  It can't be the gas, since NG is basically non-pulluting in the local scheme of things (it is just methane, basically, and bubbles away).

  •  Propane? (none)
    How does propane factor into all of this?  Is propane "Natural Gas"?  I ask since my house is propane heated.....

    "Victory means exit strategy, and it's important for the President to explain to us what the exit strategy is." -Governor George W Bush (R-TX)

    by espresso on Thu Sep 08, 2005 at 08:14:51 AM PDT

    •  Refineries (none)
      Most propane and butane comes as LPG from refineries.  You are in competition with chemical industries that use it as a feedstock.
      •  thank you. (none)
        I actually "get" that it's LPG, what I'm trying to figure out is the economic impact on propane (if any) from Katrina etc.  Thank you for your response though--I do appreciate it!

        "Victory means exit strategy, and it's important for the President to explain to us what the exit strategy is." -Governor George W Bush (R-TX)

        by espresso on Thu Sep 08, 2005 at 08:27:22 AM PDT

        [ Parent ]

        •  Cool (none)
          What I was trying to say was that just look at the refinery outages, if you have 5% capacity outages you'll get roughly the same loss of propane supply.    The economic consequences of a 5% loss in LPG supplies I wouldn't know.  You can bring in more from overseas in tankers, however, and it's easier than LNG because you don't need a gasifying terminal.
      •  Can some alternative fuel work in propane heaters? (none)
        I wonder if there's something that can be made out of kitchen grease or something like that that can heat homes? (I'm thinking of that "french fry mobile" car that goes around the country fueling itself at fast food restaurants.)
  •  My husband (4.00)
    was asking the other day how I felt the Katrina disaster would affect the economy.  He always has me keep my econonic explanations simple, and I usually try to break it down to the affect it will have on our household.

    I told him that I wouldn't be making any major purchases over the next period of time because I thought that now was the time to be bankrolling money for hard times to come.  Realistically speaking, the heating oil issue is a huge one and a latent one.  The markets may be speculating on heating oil, but the real crunch will be felt in American homes as cold weather sets in.  As I also explained to him, the higher prices we now pay for gas are reducing our disposable income.  Hence no new major purchases, and we have a combined family income well in excess of $150K.

    What disturbs me greatly as well is thinking about the families without the means that our family possesses.  For us, "cutting back" means not buying luxury-type items or "extra" items.  It's not, currently, a choice between food and fuel or medicine and heat.  But it could easily become that for middle income working Americans.  As the crunch hits, the consumer economy will be impacted with greater and greater severity as consumers curtail unnecessary (and sometimes necessary) spending.

    I have also wondered as to the effect of debt and savings levels in the US - savings is practically 0 and debt is high and growing on average - so as fuel costs and the cost of necessary goods increases, the pressure to borrow to pay for living necessities will grow.  What will that mean for our economy??

    If it weren't so cold I swear I'd move to Canada for a bit to let this all sort out.  I have no faith (and never have had any) in the forward-thinking and anticipatory policies of this Administration and don't believe that they will help the looming situation.  At best, they won't make it worse, but I don't believe that, either.

    The revolution is coming... and we ARE the revolution. Katrina Relief Diary-$14K+ and counting

    by RenaRF on Thu Sep 08, 2005 at 08:32:57 AM PDT

    •  I'm doing the same things (4.00)
      I've begun practicing no spend days --- DAYS --- when the only money I spend is the cost of electricity and water and food i already have.

      I just pulled off 5 straight days of that. I'm hoping to maintain a minimum of three days a week where I spend --- NOTHING --- except cost of electricity, water, food that's already here and, when winter comes, heating fuel.

      A month, two months ago, i was planing to start work building a back porch and getting gutters on this place. In addition to more frivolous purchases.

      Not anymore.

    •  No, buy solar, wind, wind-up stuff, currency (none)
      If Jerome is right, then it's very hard to know how much value the American dollar will have in a year. Maybe there will be deflation and the value will increase, but maybe there will be rapid inflation, and the dollar will buy a lot less.

      For a homeowner, the best thing to buy would be a solar or wind-powered heating system, along maybe with gadgets such as solar battery charges.

      Maybe it also would be good to put some of the money you do have in foreign currency. But I imagine that, if things get really bad, it will be hard to move money out of the country, so it might be good to try to establish a bank account in a country that won't report you to the U.S. if the U.S. suddenly imposes weird currency controls.

      If the economy just muddles along and energy prices stabilize, then you'll still be contributing to the long-term survival of civilization as we know it, plus you'll have backups that will help you cope with ordinary power failures.

      If the economy really collapses, then your home will be a source of modernity in a nation retreating to stone age technology.

      •  These are things ... (4.00)
        I know I've been working on for a while now. I already have a solar oven, heavy drapes, etc., and my reasons for putting on gutters and a back porch were more energy conservation and rainwater collection.

        However ... there comes a point when you have to pull in --- I think this is one of them. I'm still building the porch and adding the gutters --- but I'm doing it Johnny Cash style: one piece at a time. That is, I'm literally buying the pieces one by one nce a week at the lumber store.

      •  I've also been looking at (none)
        tankless water heaters, as an investment.  Supposedly they can save you 10 percent on your water heating bill, and they come in gas and electric.  Not to mention, replacing our dinosaur fridge with a smaller and much more efficient one.  

        Our woodstove has been a great investment so far as well!  Not the best urban option though.

        Paying off all debt is good too.

        "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

        by sarac on Thu Sep 08, 2005 at 09:46:00 AM PDT

        [ Parent ]

        •  Don't suffer to pay off debt (none)
          People should go without luxuries to pay off debt, but I don't think they should truly lower their quality of life or avoid buying basic survival gear to pay off any kind of debt other than mortgage debt or truly overwhelming credit card bills.

          Because, again, there's no way to know what the economy (or civilization) will look like in a year.

          If Al Qaeda sees how badly FEMA responded to New Orleans and decides to set off all its nukes today, then it could be that, a year from now, you won't be getting credit card statements any more but will be very grateful that you bought a sturdy pair of hiking boots.

          Note that I can't even light a match or figure out how to get a cigarette lighter going, let alone own a good pair of hiking boots, so do as I say and not as I do. But I'm convinced that what I say is the best strategy whether the United States muddles along or collapses into anarchy.

          •  I agree (none)
            I'd recommend tightening up to pay off extreme high-interest debt, but I'm not lowering my quality of life to pay off my car.  Monthly payments are just fine.

            I personally grew up with a survivor mentality.  And then I did the Peace Corps.  I'm quite comfy, but I always look at what my life would be like if, say, we lost all electric and gas and running water, and prices on everything rocketed.  I'd be okay currently, though I'd have to haul water from a small river about two blocks steeply downhill from here!  That would be a major drag...

            My brother in law gave me a great pair of his old hiking boots recently, so I'm all set there!  

            If we collapse into anarchy, maybe I can hold seminars for Kossacks on how to mend your clothes, make new ones, grow vegetables and beans, collect wild food, heat and cook with wood and solar, avoid buying new winter boots, do the laundry by hand, and stuff rags in rat holes.  Here's hoping that's just silly, and everyone stays ignorant and centrally heated.

            "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

            by sarac on Thu Sep 08, 2005 at 01:12:54 PM PDT

            [ Parent ]

    •  Vancouver, BC (none)
      It's not nearly as cold as the rest of Canada, has basically the same climate as Seattle.

      And it too has an overheated housing market. Haven't seen much on it in the last month or so due to the CBC lockout, but at last check much of the province, or at least the inhabitable regions, are in a real estate bubble.

      I'm not part of a redneck agenda - Green Day

      by eugene on Thu Sep 08, 2005 at 09:52:22 AM PDT

      [ Parent ]

  •  Environmental impact? (4.00)
    I'm going to stray a little from the topic here (sorry).

    I sincerely hope that this does not give the Bush administration leverage to start drilling for oil on the coastal plain or the front for CB methane.  I don't care if my heating costs go up 100%.  I still think these areas should be off limits to exploration.  

    However, I think I am probably in the minority w/r/t the rest of the country here (hopefully not the Kos community), especially when heating costs start hitting everyone hard come February.  Ultimately most people vote with their pocket book.  When a lot of folks are having to choose between food and heat, I'm afraid they are going to be less sympathetic to preserving wilderness and habitat.

    •  I don't know (none)
      People are going to want fast solutions. Drilling for oil and gas takes YEARS, as does constructing pipelines and powerplants.

      However, putting up windmills and solar panels is pretty fast. And, as the price of oil/gas goes up, wind/solar starts to get real competitive.

      And did I mention they were faster to build? ;-)  

      •  What about Geothermal? (none)
        Nobody ever mentions geothermal anymore, and many states no longer give tax incentives to use it. Is it still a viable way to save energy and money?
        •  I think geothermal (none)
          requires a certain type of underground structure. Not everyplace has hot springs they can tap.

          Iceland can do it. Maybe Wyoming/Montana, probably a few other places. But not everywhere.

          •  That's for power plants. (none)
            Individual geothermal installations only require a pipe that is buried a certain depth under ground. At that depth the earth holds a constant temperature. Supposedly these setups pay for themselves within 7 years.

            The pipe can be installed vertically or horizontally, depending on the available space.

  •  Jerome, can you post a diary on RE/EE? (4.00)
    I've diaried on the effect of wind power and energy efficiency on gas markets before, but don't have the mojo on this site to get any attention - there are some very important studies from DOE & Union of Concerned Scientists that show that a ramp-up of wind power and energy efficiency programs can cause a rapid drop in natural gas consumption - along the lines of 1-2% nationally, more than enough to cause a substantial drop in prices.

    Please e-mail me if you'd like to collaborate on this; use the address in my profile.

    And hey man, nice work.

    I am the federal government.

    by mateosf on Thu Sep 08, 2005 at 09:08:42 AM PDT

  •  Loss of a port (4.00)
    I don't have an MBA from Harvard, or anywhere.  I didn't even go to college.  But even I can see that if you take a major city out of the economic equation, you can count on nothing but hurt.  Even I can see that if you take the largest commercial port offline, the cost of shipping everything is going to go up, which means the cost of everything is going to go up.  

    So, why couldn't the guy who does have an MBA from Harvard see that?  Why couldn't the guy who claims to be pro-business see that this was a huge risk to business?  

    One of the diaries this morning asks which Democrat will be the first to call for Bush's resignation.  Here's a slightly different question:  Which CEO of a major corporation will be the first to call for Bush's resignation?  Or any sort of accountability at all.  

  •  Actually, the real danger (none)
    isn't gasoline.  It's the loss of the largest agricultural port in the world.  Pretty much every agricultural export from the west side of the appalachians and across the plains goes down the Mississippi by barge and out through New Orleans on large container ships.  Only a small percentage goes out via the Saint Lawrence Seaway, and virtually nothing from the heartlands is shipped out via ports on either coast.  The cost of ground transport is simply too high--and the nation doesn't have enough trucks to ferry the freight to the coasts.

    We are the largest corn and soybean exporter in the world.  Wheat is up there, too.  The vast majority of it goes out through NO.  The Mississippi River system is the only transport network on the continent capable of moving that much freight.  Fall is coming up fast.  Harvest  will begin in a matter of weeks.  

    This is going to be a major setback for our farmers.  We are going to see crops rotting, unsold.  It's going to hit the GDP, bigtime.  Domestic prices will drop because there will be a glut.  Farmers will go under.  It's not going to be pretty.

    "Don't want to be an American idiot..." -- Green Day

    by Black Maned Pensator on Thu Sep 08, 2005 at 09:47:46 AM PDT

    •  Okay, I feel like an idiot (none)
      read the first part of the post, thought, oh no, another post on oil that ignores everything else, and skipped the rest.  Someday, I'll learn to read the entire diary before judging.

      Thanks for the more complete analysis, Jerome.

      "Don't want to be an American idiot..." -- Green Day

      by Black Maned Pensator on Thu Sep 08, 2005 at 09:53:03 AM PDT

      [ Parent ]

  •  Another shortage (none)
    It's not just grain, auto parts, and pig iron that will be in short supply without the port getting up and running. From the LA Times article that Jerome linked to, Mexican beer shipments are also threatened:

    At the Port of Coatzacoalcos in southern Mexico, officials are concerned about how to keep another popular beverage -- beer -- flowing to U.S. customers.

    Coatzacoalcos is linked to the Port of New Orleans via a rail-ferry service established last year. Operated by CG Railway Inc., the system allows companies such as Mexican brewer Grupo Modelo to ship boxcars loaded with their product over water to New Orleans, where they are unloaded and whisked to their destinations by rail.

    The rail-water service requires special infrastructure that can't be quickly replicated in other ports, said Gilberto Rios, director general of the Mexican port. He said clients such as Grupo Modelo, as well as exporters of petrochemicals and metal products, had been forced to ship their products over land by rail to the U.S., adding time and cost to the process.

    Grupo Modelo brews Corona, Negra Modelo, Modelo Especial, and even my personal favorite, Pacifico.

    Given all the other possible threats to the economy this may seem minor. But if I can't drown my sorrows in cheap, readily available Pacifico, I don't know what I'm going to do. Maybe have to switch to Dos Equis or, god forbid, Tecate.

    I'm not part of a redneck agenda - Green Day

    by eugene on Thu Sep 08, 2005 at 10:06:51 AM PDT

    •  Eugene, that's huge! (none)
      Er, you didn't mention Dos Equis.  Any word on that?  I like the dark.  (That may be why I'm not a Republican...)
      •  I did mention Dos Equis (none)
        Its not a Grupo Modelo beer. I did say I might have to shift to it if Pacifico becomes unavailable. Hopefully that won't become necessary.

        I'm not part of a redneck agenda - Green Day

        by eugene on Thu Sep 08, 2005 at 05:59:20 PM PDT

        [ Parent ]

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