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Cost of warm, stocked house surges
Household goods’ raw materials scarcer
Paul Adams, Baltimore Sun (US)
It’s in everything from sandwich bags, microwaves and stereos to DVDs, cars and computers. Even the adhesive on shampoo labels and the caulking around bathtubs across America depends on it.
Oil and natural gas are the base materials for chemicals and raw materials that show up in more than 90 percent of the consumer goods and packaging Americans take home from the mall. And just like the gas fueling American cars, those fossil fuel-based raw materials have gotten more expensive and harder to get in the wake of Hurricane Katrina as a result of the temporary loss of dozens of key chemical plants along the Gulf Coast. …
DAP Products Inc. is among the companies feeling the pinch. The Baltimore-based maker of caulking, spackling compound and other building and home improvement products has seen costs double for many of the chemicals it uses. Gas and oil form the basis for both the products it makes and the plastic used to package them. “Chemicals have been on a horrific uphill run for better than two years,” said John McLaughlin, DAP’s president and chief executive. He blames it in part on rising demand from Asia and a lack of new production plants being built.
McLaughlin counted some 51 chemical plants in the gulf region that were at least temporarily shut down by Katrina. “From our standpoint, the question becomes when does the supply become so tight that we can’t get it,” he said. “All of the refineries there are shut down and I know one of our bigger plastics suppliers said yesterday they are in fear of running out of propylene to make plastic cartridges” for packaging. …
Economists say Katrina also is disrupting the manufacturing supply chain because it has wiped out a key east-west highway and the port of New Orleans, which is a major artery for grain from the Midwest as well as imported steel, coffee and a host of other products. Railroads also were affected. …
(3 September 2005)
Good journalism on the complexity of supply chains and the many faces of our oil dependency.-LJ
IEA head says US gasoline crisis could spread worldwide
Staff, AFP via PoliticalGateway.com
PARIS – The head of the International Energy Agency warned Friday that a severe gasoline (petrol) shortage in the United States, if it should occur in the aftermath of Hurricane Katrina, would likely spread rapidly worldwide.
The oil market even in normal times “is … very fluid across the Atlantic and when there is a crisis in the United States, prices rise on the US market and that leads to more oil companies selling in the United States than in Europe,” Claude Mandil said in an interview with French newspaper La Croix.
“There is no doubt that if in the aftermath of Hurricane Katrina a gasoline crisis occurs it will spread very rapidly at the world level.”
According to US government data, the hurricane has shut down an estimated 90 percent of crude production and 79 percent of natural gas output in the Gulf of Mexico, which accounts for a quarter of total US oil output. …
(2 September 2005)
Oil Firms Turn Katrina Into Profits, Clinton Says
N.Y. Senator Criticizes Lack of National Leadership, Freedom From Imports
Dan Balz, Washington Post
SYRACUSE, N.Y. — Pressed by constituents alarmed by skyrocketing gasoline prices in the aftermath of Hurricane Katrina, Sen. Hillary Rodham Clinton (D-N.Y.) accused oil companies of manipulating energy markets to enhance profits and decried a lack of national leadership for a plan to free the country from dependence on foreign oil.
“I want to go after the oil companies and the oil speculators and the manipulators of the money, because they’re the ones who I think are really behind this,” Clinton told an audience in Elmira Heights on Thursday. “You have a hurricane, and all of a sudden you see prices going up like that. That has . . . everything to do with people trying to make money off the backs of this tragedy.”
Clinton repeatedly took aim at record profits rolled up by energy giants during the last quarter as crude oil prices have continued to rise. Her rhetoric was at times angry, exasperated, frustrated and passionate. “You just cannot convince me that they are not manipulating this market,” she told another audience near Newark, N.Y.
…Clinton criticized the new energy bill, which she opposed, as inadequate to solve the country’s long-term energy problem. She said the United States has regressed over the past three decades, since the first oil shocks of the early 1970s. “We’ve had 30 years to do some things we haven’t done,” she said. “In fact we’ve gotten, we’ve gone backwards in many respects.
“I am tired of being at the mercy of people in the Middle East and elsewhere, and I’m tired frankly of being at the mercy of these large oil companies,” Clinton said.
(2 September 2005)
U.S. drivers won’t cut back on gas
Even at $3 a gallon, Americans unlikely to seriously cut down on gasoline consumption.
Staff, Reuters via CNN
U.S. drivers may take baby steps to reduce the amount of gasoline they burn, but long commutes and inefficient vehicles mean consumers could be locked into high fuel demand despite rocketing prices, experts said. Gasoline prices hit a record $2.68 a gallon on Thursday, according to travel club AAA. But experts said prices would have to go far higher to substantially cut demand. “It takes just enormous price increases of gasoline to launch demand destruction,” said Phil Verleger, an independent oil consultant.
Even though prices have spiked as high as $5 a gallon in some locations, Verleger said, costs over the entire United States would probably have to average between $5 to $10 a gallon to trim gasoline demand by even 5 percent. …
“They (drivers) are not going to substantially reduce gasoline consumption,” John Lichtblau, chairman of consultants PIRA Energy Group in New York, said about steps consumers take to reduce consumption that fall short of buying more efficient automobiles. “At the margin they can reduce it somewhat, maybe in the 5 percent region. But it’s going to have a very modest impact on consumption in the short term, probably the next two or three months,” he said. …
“In the short run, people’s consumption is essentially fixed for gasoline,” said Jason Schenker, analyst at Wachovia Securities. “The biggest evidence of this is despite the fact we’ve got prices at $3, $4 or $5 a gallon, we’ve got consumers lining up to pay for it.”
(2 September 2005)
Venezuela to Sell U.S. More Fuel Because of Storm, Chavez Says
Staff, Bloomberg
Venezuela plans to sell 1 million barrels of additional gasoline to the U.S. to help alleviate shortages triggered by Hurricane Katrina, President Hugo Chavez said on his weekly television show in Caracas. Chavez did not say when the gasoline would be sent. Venezuela, the world’s fifth-largest oil exporter, already sells about 1.5 million barrels a day of crude to the U.S. …
Citgo Petroleum Corp., the U.S. fuel-making unit of state oil company Petroleos de Venezuela SA, raised output at its four refineries to 834,000 barrels a day from 810,000 in response to gasoline shortages in the U.S., company President Felix Rodriguez said on the program. “We’re doubling efforts to supply the American people and mitigate part of the gas deficit,” Rodriguez said. Venezuela also offered to donate $5 million to hurricane relief programs, Chavez said.
(4 September 2005)
In boat haven, soaring fuel costs bring subtle changes
Sarah Kershaw, NY Times
…if there is one place right now where gasoline consumers are not feeling completely panicked over the fast-rising price of fuel, it might be the gas station at Morrison’s North Star Marine on Lake Union, where Randy Jones, 55, affably paid $1,167 the other afternoon to fill half the tank of his 40-foot Tollycraft. The 20-year-old vessel gets the kind of mileage – precisely one mile per gallon at cruising speed – that makes a sport utility vehicle look as fuel efficient as a bicycle.
…”If they already have a boat, they are not going as far and they are not going as fast,” said Robbie Robinson, president of Signature Yachts, which says it is the largest dealer of sailboats in the Pacific Northwest. “A significant number of people are staying local as opposed to going to Alaska or Canada.”
Mr. Robinson also said he had seen a number of customers seeking to trade in motorboats for sailboats.
Boat owners have also begun overhauling their vessels so they can use diesel fuel, industry experts say, which is considered less harmful to the environment than gasoline.
Officials with a new Seattle boat dealer, the Electric Boat Company, which began selling electrically powered boats in the last year and a half…
In 1999, the Union of Concerned Scientists, in a book titled “The Consumer’s Guide to Effective Environmental Choices,” said that while there are far fewer motorboats on the water than cars on the road, the average marine engine “causes considerably more environmental damage than a car engine for each hour it operates.”
(5 September 2005)
Beyond Petroleum
Brian Siu, TomPaine.com
…if Congress really wants to limit risk, it will break with conventional oil policy. This means diversifying our transportation fuels and improving vehicle performance. There are many possibilities. New breeds of ethanol, for example, could function as a supply cushion, absorbing the impacts of petroleum disruption. And because these fuels are harvested and refined domestically, they would strengthen the U.S. trade position. In fact, agricultural fuels could function as a potent economic development tool for struggling rural economies.
…Even so, U.S. energy security can not rest on alternative fuels alone. It requires us to become less sensitive to supply interruptions by using less energy overall. Efficient vehicles like hybrids would go a long way toward limiting energy consumption. And like alternative fuels, efficient vehicles would benefit the U.S economy by giving workers a role in this growing market segment. The Apollo Alliance, a coalition of labor, environmental, community and business leaders, estimates that a meaningful commitment to efficient vehicles could secure more than 128,000 jobs for U.S. workers.
These fuels and technologies already exist—but are disadvantaged by petroleum’s century long dominance. The strong public interest behind a stable fuel supply justifies equally strong government intervention. While it is too late to protect ourselves from the present catastrophe, we can protect ourselves from future events.
Brian Siu is an energy policy analyst at the Apollo Alliance.-BA
(2 September 2005)
Myths about America
Maria Farrell, Crooked Timber
…In my own fuzzy-logic way, I’d presumed that the cheapness of every day goods in the US was mostly because of the flexibility of the economy, i.e. the ability of employers to pay low wages, fire at will, offer few benefits, and generally pass on costs like environmental protection or maternity benefits. A few weeks in California cured me. Sure, labour ‘flexibility’ helps. But the cheap price of petrol is more important than I’d ever imagined. As newspapers and coffee breaks filled with doomsday scenarios of paying $6 dollars a gallon for gas, I sat down one day and did the sums.
That’s what we pay in Ireland. Today. Most of the extra cost goes in taxes, and the cost of that affects every imagineable part of life. Paying more for oil makes everything more expensive – getting food to the shops, from there home, cooking it, and cleaning up afterwards. It means more people rely on public transport, creating a policy feedback loop of greater government spending and making more citizens using shared resources every day of their lives. It means we don’t run central heating or (if we had ever needed it) air conditioning all or most the time, and probably just put on another jumper when it’s cold. It means we advertise cars based on their fuel consumption and we don’t have ‘all you can eat’ restaurant buffets. Teenagers don’t have their own jobs and cars, and rely on their parents, the bus or shanks mare to get around. They get it off in parks instead of cars. Not that many people drive to the gym. Until recently, not many people needed to go to the gym either.
Others on [Crooked Timber] understand far better than I do the economic significance of America’s globally unique strategy of running a vast economy on cheap, cheap oil. And yet others can discuss how this dependence makes America less and less secure. (And how Amerca’s efforts to secure its own oil supply has made the world less and less secure for the rest of us.) It’s been a simple but revealing insight for me; the myth that America’s economic engine purrs along fuelled by of the virtues of its rather brutal labour market is only partly true. US work places may be dominated by the masochistic ideology of living to work, but the secret of success is simple. America lives or dies on cheap oil.
(4 September 2005)
A view of America from Ireland. Recommended by Big Gav at Peak Energy, Australian division.
Tanzanian plastic industry hit by soaring oil prices
Staff, Xinhua (China)
Soaring oil prices coupled with depreciated shillings have hit the plastic industry in Tanzania where plastic products are likely to sell at 70 percent more than their usual prices. Plastics are produced using mainly petrochemicals which are derived from crude oil that reached an unprecedented price level of 70 US dollars a barrel on the international market.
Harpreet Duggal, secretary-general of the Plastic Manufactures Association of Tanzania, told local media that prices of high- density polythene, the industry’s main raw material, went up from 980 dollars per ton to 1,140 dollars a ton at the end of last month. Duggal predicted that the prices of high-density polythene could reach as high as 1,225 dollars per ton by the end of this month. “Companies are now left with two alternatives of either to improve efficiency or close down,” said Duggal. The plastic industry in Tanzania directly employs 3,000 workers and holds some 10,000 others in indirect jobs. …
The Bank of Tanzania had to intervene in the foreign exchange market last week by pumping 2.75 million dollars to rescue and strengthen the shillings from further depreciation and to cushion the upsurge in volatile market demands.
(5 September 2005)
This is a familiar story around the world, but its worth keeping track of when and where the impacts are being felt.-LJ
