Short Term Oil Issues
Following up on the long post below, CNN has an article about the short- and long-term effects of Hurricane Katrina on American oil stocks. Apparently before Katrina, an increase in American oil stocks was forecasted. Now that Katrina has temporarily stopped the American oil infrastructure, that bounce in the oil stock isn't going to happen, and a near-term "crisis" may, may, occur. However, it's expected to calm down soon after, and the American economy is still expected to grow by a four percent (vice the original estimate of four-point-six percent) in the third quarter of this year.
Is it a major bump? Arguably. Is it a long-term issue? Probably not. You also have to keep in mind that, as horrible as this disaster is, it will probably encourage the economy in the long run. What will be needed? Construction. Restoration. New infrastructure, and I mean power poles, power lines, buildings, houses, repairs to the Superdome, ad infinitum. And the oil infrastructure will be repaired, and it will be brought back online, and things will stabilize. And we should still implement the changes that I proposed, because they would alleviate the adverse nationwide damage that disasters like this cause.
Another thing I'd like to mention that I missed in the big post, that's worth noting as a passing statement, regards all those foreign oil refineries. As the situation stands, they're allegedly refining oil at full capacity. Assuming you could continue production at full capacity indefinitely, which you can't due to things like routine maintenance and incidental equipment failures, you could keep the production up. I already mentioned that the Middle East, and various other areas where we import oil from, are unstable, and subject to less-than-full capacity production. If they have equipment failure, that reduces production. When they go down for maintenance, that reduces production. This, in turn, reduces the supply, and the simple equation of decreased supply plus constant or increased demand means? Say it with me: "A price increase."
So, there you go. Big issue. I'll probably keep hitting on it in the coming months.
Is it a major bump? Arguably. Is it a long-term issue? Probably not. You also have to keep in mind that, as horrible as this disaster is, it will probably encourage the economy in the long run. What will be needed? Construction. Restoration. New infrastructure, and I mean power poles, power lines, buildings, houses, repairs to the Superdome, ad infinitum. And the oil infrastructure will be repaired, and it will be brought back online, and things will stabilize. And we should still implement the changes that I proposed, because they would alleviate the adverse nationwide damage that disasters like this cause.
Another thing I'd like to mention that I missed in the big post, that's worth noting as a passing statement, regards all those foreign oil refineries. As the situation stands, they're allegedly refining oil at full capacity. Assuming you could continue production at full capacity indefinitely, which you can't due to things like routine maintenance and incidental equipment failures, you could keep the production up. I already mentioned that the Middle East, and various other areas where we import oil from, are unstable, and subject to less-than-full capacity production. If they have equipment failure, that reduces production. When they go down for maintenance, that reduces production. This, in turn, reduces the supply, and the simple equation of decreased supply plus constant or increased demand means? Say it with me: "A price increase."
So, there you go. Big issue. I'll probably keep hitting on it in the coming months.
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