Hang Onto Your Hat - Aftereffects of Katrina

Like a boulder dropped into a lake, the ripples from Katrina will expand for a long time. No matter which approach I take for looking at this disaster, the effects radiate outwards and grow as they proceed. I have seen no numbers on how many people are displaced, but it has to be over a million. Regardless of the displaced peoples resources, the basis for their economic survival has been undermined. How long can those lucky enough to be holed up in hotels or with friends and relatives, continue to support themselves? How long can those without resources survive camped in front of their smashed homes with no water, food, or electricity? How long can those who were left behind in New Orleans continue to live in football stadiums, or stand on bridges hoping for help? The scope of the human disaster is almost unimaginable. It will be months, if ever, that people's lives will return to some degree of normalcy.

However, there is another level of this disaster that will effect those from the impacted areas - disease. The toxic soup of the water in New Orleans; the dead - human and otherwise - providing vectors for disease; the "decay" process - are all vectors for ongoing and serious health consequences.

Just cleaning up and dealing with the disaster will stretches the resources of the nation. Resources that, quite frankly, we do not have. But Katrina has struck a crippling blow at the oil infrastructure of the United States. A significant portion of the oil and gas for the U.S. moves through the impacted area. Even those facilities that may have escaped significant damage are halted by the problems around them. You can't process oil without water and electricity, and transportation of supplies. You can't run them single-handedly. If the workforce cannot survive in the area, they aren't their to do their jobs. If there is not electricity, the pumps to move the "products" to the eastern half the country do not move.

Katrina struck hard at the oil infrastructure in the Gulf of Mexico. The actual capacity has been significantly impacted. There is a stunning report at The Oil Drum - Newest (and very informative and very scary) report from an anonymous insider. According to this anonymous insider the now known damage in the Gulf includes:

- Many production platforms (each service one hundred or more wells) are simply missing. They are either torn loses and floated away, or are sitting at the bottom of the Gulf; (Confirmed by AFP - 20 oil rigs missing in Gulf of Mexico: US Coast Guard)

- 90% of the stand alone (caisson) wells are bent. They will have to be replaced or re-drilled before they are productive again;

- There are roughly 15 hubs missing. Hubs are platforms where collection of oil and gas from other wells is collected before sending it on to shore.

- "Jackup" rigs (those positioned over wells) have shifted or been damaged. Each will have to be repositioned. If the well head has been damaged, they will need to be re-drilled.

- 30% of the boats used to service and repair the rigs in the Gulf are destroyed.

The supplier of this information says that it will take years to return to production in the Gulf.

Since that area provides about 25% of domestic oil and gas supply, and serves as an entry collection and processing point for imported oil, we can expect at least an ongoing 25% decrease in supply of gasoline, heating oil and natural gas. The news from the Cincinnati Enquirer that Gas bills to explode, comes as no surprise. Natural gas prices were already going up 30% over last year - and that was BEFORE Katrina hit.

In response to the crisis, Bush has decided to "lend" crude oil from the Strategic Petroleum Reserve to refiners. Since all of the refineries were already running near capacity, the release from the strategic reserve may have minimal impact on supply. Bush has also authorized a temporary abatement of EPA regulations on the gasoline produced. That means that the processing to meet environmental pollution standards are temporarily not required. This will, presumably, allow refineries to move more product in a shorter time. For now, this waiver from environmental controls is scheduled to end September 15. Hopefully it will not become institutionalized as that would exacerbate both environmental and health consequences.

There is an interesting article at Rude Awakening - An Oil Panic In Plain Site. Sean Brodick brings in some interesting and troubling pieces of this puzzle. Pieces such the decision to expand the strategic reserve, how much oil the Saudi's actually can provide (and what good that will do if there is not the refinery capacity to deal with it).

It is now old news that gasoline is likely to jump to $4 a gallon. The way the prices are running up, $5 a gallon is not far behind. All bets are off, and if the damage in the Gulf is as extreme as reported, then there is no top for prices that I can see.

This is a story that is going to continue to grow for quite some time, and will impact everyone in the US dramatically. Not to be extremist, it could cause a U.S. economic collapse. If that happens, it is likely that in our global economy that there will be a collapse there as well.

Even though Katrina is a natural disaster, what has fueled that disaster is very human. It seems highly likely that global warming provided impetus for Katrina (and we are only about half way through the hurricane season). The disaster in New Orleans is partially due to shifting of federal funds to "the war on terrorism" and "homeland security," which cut funds for finishing the levee system. Rapid development in News Orleans has destroyed massive amounts of the marsh land that served as a natural drainage system. Since the same underpinnings exist around the country (and the world), Katrina may be just an indicator of what lies ahead.