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Re: SC75

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September 09, 2008 05:42AM
http://blogs.wsj.com/environmentalcapital/2008/09/08/storm-warning-ikes-impact-could-go-far-beyond-hurricane-season/

Storm Warning: Ike’s Impact Could Go Far Beyond Hurricane Season

While armchair meteorologists are plotting Hurricane Ike’s path into the Gulf of Mexico, trying to divine what could happen to vulnerable Gulf oil installations and oil prices, the real problem isn’t short-term price spikes or even refinery outages that drive up the price of gasoline.

The real problem is that thanks to hurricanes, the Gulf of Mexico will never live up to its promise as a mother lode of U.S. domestic oil production, leaving the country even more vulnerable to imports. Then the question becomes—imports from where?

That’s the argument laid out in a new report from Jeff Rubin at Canadian investment bank CIBC World Markets, the guys who earlier this year projected $200 oil. Hurricane damage in the Gulf isn’t limited to evacuated rigs or shut-in refineries; the real damage from increasingly brutal storm seasons is the long-term delay in getting new oil fields up and producing.

Three years after Hurricane Katrina, the Gulf still hasn’t recovered its pre-2005 production levels, CIBC notes. Thanks to rapid production declines at existing fields and huge delays getting new fields operational, official U.S. government forecasts for the Gulf’s role in U.S. oil production are wildly overblown, Mr. Rubin says:

Instead of ramping up production to over 2 million barrels per day as once dreamed by the Departments of the Interior and Energy, Gulf of Mexico production is likely to fall to a low of a million barrels per day by 2013—a third lower than the region’s production prior to the 2005 storm season.

Well there’s always Alaska, right? Governor Sarah Palin has brought drilling in the Alaskan National Wildlife Refuge to the Republican ticket. Doesn’t matter, say the guys at CIBC:

It is certainly clear that no matter what policies are taken toward the ANWR, the region will provide no offset to a further decline in both Gulf of Mexico production and lower 48 state oil production over the next five years.

So how will the U.S. meet its oil needs? Mexico’s big fields are declining at a dizzying rate, even as domestic oil demand soars. Canada’s got tar sands—but they are hugely expensive to develop, require extensive treatment to refine, and are an environmental nightmare. Venezuela’s tar sands are even harder to extract, and Venezuela’s recent expropriations give technically-savvy foreign oil companies the investment willies.............
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