Cautious Word on Gas Prices

I think it's great that the price of gasoline has dropped about twelve cents in my area in the last week or so. However, given the strange political environment we're in these days, the drop in prices seems rather convenient for Republican incumbents worried about the wrath of voters this year as the midterm elections approach. But our underlying energy problems have not changed and a week or even a few months of falling prices doesn't mean much.

If we have war with Iran, I would not be surprised to see $5.00/gallon or higher. If British Petroleum or other oil companies discover more pipelines that are corroding as BP did in Alaska, we could have more problems. When oil prices were low just a few years ago, it appears oil companies cut back on maintenance and infrastructure improvements.

And then there's all those high-priced oil rigs in the Gulf of Mexico. Once again, we're in hurricane season and a substantial portion of our oil production is once again at risk. Here's the story from the Rigzone:

As the one-year anniversary of Hurricane Katrina approached, the energy industry was watching a possibly ominous tropical storm strengthening in the Atlantic Basin, which was expected to be upgraded and named Ernesto before the end of Friday.

Many Houston-based oil and natural gas companies were taking a wait-and-see approach to the possible threat. BP plc was one of the few to officially announce it was considering an evacuation of its nonessential personnel from its rigs on Friday. None of its production was expected to be affected. Chevron Corp. and Apache Corp. also were monitoring the storm, but they announced no plans to evacuate.

At El Paso, spokesman Joe Hollier said the company was prepared to activate a storm plan if it became necessary. In any case, Hollier said El Paso has "accelerated" its evacuation plans, moving them up "a day or two for offshore and onshore as well," he said. Since last year, he said El Paso has installed new systems to improve employee safety. "Our communications have increased a bunch. We now have satellite phones on all of our helicopters, and we have an employee 1-800 tracking number. That is a big thing."

What I'm learning from articles like this is that American business, unlike the White House, is still fact driven and it still manages to learn from mistakes or to simply find better ways to do things. But to protect oil rigs from powerful hurricanes is expensive and no one is likely to build a rig that's guaranteed to survive category 5 hurricanes. Our oil from the gulf will remain vulnerable for some time to come even from category 3 and category 4 hurricanes.

Here's more from the British paper, The Independent:

The fifth tropical storm of the Atlantic hurricane season, Ernesto, could turn into a powerful hurricane once it hits the Gulf of Mexico later this week, weather forecasters have predicted.

As it passes over the warm waters of the Gulf, there is a fear that it could strengthen and become destructive, the US National Hurricane Center said. If this occurred, the hurricane would coincide with the first anniversary of Hurricane Katrina.

And, according to Reuters, it looks like British Petroleum isn't taking any chances:

[British Petroleum] said it planned to pull 800 nonessential workers from U.S. Gulf of Mexico drilling rigs and non-producing platforms on Saturday in preparation for Tropical Storm Ernesto.

BP's Gulf liquids production, which was 214,000 barrels per day in 2005, will not be affected by the evacuations, the company said in a statement.

Saturday's evacuations will slash BP's offshore Gulf work force by a third, the company said.

Predicting the weather is tricky business and Ernesto may not become the threat that some worry that it may become. But one thing is certain: since Hurricane Katrina, we have entered a different era. And Bush still has no energy plan worthy of the name. And FEMA appears to be in as much disarray as ever. But even local government officials and agencies along the gulf coast are somewhat fact driven and have already made improvements in some areas from last year. One thing is for certain: if there are problems, they won't be looking to Bush for leadership.