Hurricane Katrina's aftermath only hints at what will happen when demand for crude outstrips supply
THE July-August edition of Alcalde, the magazine for University of Texas at Austin alumni, contains an article about peak oil — the moment when global oil production will crest and then decline. According to the article, "How Long Do We Have," the year U.S. oil production peaked, 1971, was accurately predicted by a Shell Oil geophysicist in 1956. The same formula puts peak global production in this decade or the next.
Many predictions about a shortage of oil have come and gone, always superseded by new technology and newly discovered reserves. However, economic catastrophe need not wait until we run out of oil, or even for production to peak. As the experience inflicted by Hurricane Katrina merely hints, there is no margin in today's energy markets. Disruption of markets, shortages and steep price increases require only for demand to slightly exceed supply.
Natural gas pipelines are slowly returning to normal, but the supply of crude and refined products is strained. Katrina forced the temporary halt of oil and gas production in a region that supplies a quarter of the nation's domestic supply. It knocked out or reduced capacity in 10 refineries. Terminals for imported oil were shut, reducing the ability to replace lost sources of supply.
It will take weeks to repair refineries and distribution networks. Many firms lost offshore rigs and platforms, reducing current production and the ability to explore for and replace proven reserves.
The Bush administration is releasing millions of barrels of crude from the nation's strategic reserve. Led by German Chancellor Gerhard Schr�der, the International Energy Agency has agreed to release oil from Europe's reserves, dampening upward pressure on prices. Reserves, however, are useful only in a crisis. They do not have the ability to make supply equal rapidly growing demand, spurred by developing economies such as China's and India's.
The U.S. gas lines during the 1970s persuaded many drivers to opt for more efficient cars. But memories fade, and all too soon the trend was for gas-guzzling trucks and SUVs.
Perhaps the shock of Katrina's destruction, the demonstrated vulnerability of the nation's energy supply and the rapid doubling of gasoline prices will move many Americans to ride mass transit, live closer to work or drive smaller cars. History, however, suggests that the moment will pass, things will settle down, and we will be grotesquely unprepared for the moment when there simply is not enough oil to go around and only the wealthy can afford it.