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Sunday, July 10, 2005

Oil Storm

Oil Storm is a mock documentary that first ran on the FX cable channel on June 5, 2005. It has its flaws, but it offers a series of worst-case scenarios that rock the US economy. Given that Hurricane Dennis just whipped through the Gulf of Mexico, the movie helps understand why the energy markets go nuts every time a big hurricane is on the water in the Gulf. Synopsis:

Oil Storm examines what happens when a Category 4 hurricane ("Julia") in the Gulf of Mexico slams into Louisiana in September 2005. The storm ends up crushing the city of New Orleans and crippling the vital pipeline that is at Port Fourchon. It examines the ripple effect of that event and the ensuing cascade of disasters associated with it, through the eyes of public officials, a family in Texas who own a gas station, an EMS worker in Boston who has to deal with a brutal winter, and a ranching family in South Dakota who have their subsidy's completely taken away and question whether we need oil or food to survive.

As the country reels from the loss of life and energy reserves associated with the hurricane's fury, the price of oil skyrockets to $153 a barrel...

Understanding the significance of Port Fourchon, Louisiana is one lesson the movie teaches. As Reuters reported:
On the edge of Louisiana's vast coastal marshlands, 70 miles southwest of New Orleans, about the only thing convenient to Port Fourchon is the central Gulf of Mexico...

"Our port plays a role somewhere between 16 and 18 percent of the total oil supply," said Ted Falgout, director of Port Fourchon, explaining that 13 percent of the nation's foreign oil flows through and servicing companies keep 27 percent of the domestic supply pumping.

Oil Storm [FXnetworks.com]
Oil Storm [imdb.com]
Market Review: Oil Storm [dailyreckoning.com]
Port Fourchon [portfourchon.com]
Obscure Louisiana port linchpin for U.S. energy [reuters.com]
Port Fourchon maps and pictures [1a1coalition.org]
Oil Storm [wikipedia.org]
Port Fourchon [wikipedia.org]
satellite map of Port Fourchon [maps.google.com]

oil market podcasts [oilcast.com]

update: Aug. 31, 2005
Part of this fictional story has become a very grim reality. Katrina almost duplicated the path of the fictional Hurricane "Julia." Oil prices have stayed below $70 despite the damage to the rigs, pipelines and Port Fourchon. However, gasoline prices are spiking. Oil traders hang on every word from Port Fourchon Director Ted Falgout as he updates the situation for the news networks. Currently natural gas prices are more adversely affected than oil prices. Suprising to learn that the levees in New Orleans were only built to withstand a category 3 hurricane.

Katrina hurt natural gas production and refinery capability far more than portrayed by the fictional Hurricane "Julia." Natural gas pipelines and refineries are the real Achilles heel of United States energy production in the Louisiana/New Orleans Area. The oil spigot can be turned by tapping the Strategic Petroleum Reserve. However, more oil does not mean more gasoline until it is refined. It was surprising to learn that Europe has a strategic gasoline reserve. The bottomline is that oil without refineries is useless.

It is reported that Eight Gulf of Mexico refineries remain shut and one is operating at a reduced rate while damage from Hurricane Katrina continues to be assessed by oil and gas companies.

Access to some of the refineries is difficult. Conditions at those locations are as follows:

  • Baton Rouge, La. - At nearly 394,000 barrels a day, one of the gulf's
    largest refinery owned by Exxon Mobil Corp. is running at a reduced

  • Pascagoula, Miss. - Chevron Corp.'s 325,000 barrel a day refinery
    remains shut. The company says access to the refinery remains

  • Norco, La. - Valero Energy Corp.'s St. Charles refinery is not likely
    to resume its 260,000 barrel a day operations for up to two weeks.

  • Garyville, La. - Marathon Oil Corp.'s 245,000 barrel a day refinery
    remains shut. Access is limited.

  • Belle Chasse, La. - ConocoPhillips' Alliance refinery remains shut
    while the company continues to assess damage to the 255,000 barrel a day

  • Convent, La. -- Motiva Enterprises's 255,000 barrel a day facility
    sustained minimal damage.

  • Norco, La. - Access to Motiva Enterprises's 242,000 barrel a day
    refinery is limited, so damage still is being assessed.

  • Chalmette, La. - Exxon Mobil has not been able to visit the 183,000
    barrel a day refinery, which shut down on Sunday.

  • Meraux, La. - The 125,000 barrel a day facility by Murphy Oil Corp.
    remains shut down as access remains limited.

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