Hurricane Harvey Is Hitting the US Oil Economy Hard

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Kate Harveston

Kate Harveston is originally from Williamsport, PA and holds a bachelor's degree in English. She enjoys writing about health and social justice issues. When she isn't writing, she can usually be found curled up reading dystopian fiction or hiking and searching for inspiration. If you like her writing, follow her blog, So Well, So Woman.

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5 Responses

  1. Avatar Kolohe says:

    According to this the September delivery is way way up, (not surprising), but the October contracts are only slightly up, and the further out months are more or less consistent with long term trends

    This article also provides the context that right now everyone is on their last run of summer grade gasoline; in another month, production gets somewhat easier and cheaper, and (i think, but I am not at all sure) the blends become more fungible across regions – thus ammeriolating localized supply distruptions.

    The other macroeconomic effect will be of course, recontruction, but if and only if the hit to the financial industry doesn’t unconcover some systemic weakness. I.e. as long as insurers remain solvent, everything will be fine. Government interest rates, while off their low peg finally, are still pretty low, so additional debt at this point shouldn’t have a net negative GDP macroeconomic effect – and the demand side push may finally get the Treasury Yield curves closer to ‘normal’ parameters, so the Fed has some wiggle room when the next downturn inevitably occurs.

    But maybe the market is significantly mispricing the distruption in Houston energy production & delivery infrastructure, and we can’t really count on the US Federal government acting in a mesured but decisive manner over the next couple years. (The US treasury techincally doesn’t have the ability to take on new debt right now because of the debt ceiling limit)Report

  2. Avatar North says:

    Good analysis.Report

  3. Avatar Kolohe says:

    Poor oil performance doesn’t help the position of the US dollar, which is currently lagging behind several other foreign bank notes, such as the euro, which has benefitted from a resurgence in EU stocks. China’s major stock indexes have risen to 20-month highs, a negative for the US. But in a glimmer of hope, markets shrugged off North Korea’s recent missile launch into the ocean near Japan.

    A shift from a Petrodollar ‘standard’ to a Petroeuro (or Petrorenminbi or what have you) has been a bugabear of the zerohedge and Oil Drum (rip*) crowds in their heydey. It..still hasn’t happened yet.

    The US Dollar is down for the year compared to the Euro, but that’s because the Euro was at a multi-year low due to the Greek crisis and then the Brexit risk. The ‘high’ now of the Euro would have been the dip in most of the past ten years.

    And of course, a weak dollar helps some sectors (and hurts some), just like a strong dollar helps some and hurts some.

    *I didn’t realize until looking it up that they were no longer a thing.Report

    • Avatar Michael Cain in reply to Kolohe says:

      The Oil Drum pretty much had to shut down once it became clear that global production was not going to fall off a cliff nor was the end of the world as we know it coming in the next few years. Most of their resident doomsayers have moved on to climate change (and the imminent end of the world as we know it). I’ve always been perplexed by the attraction of the EOTWAWKI concept — I’m a big fan of computers, data networks, modern medicine, and indoor toilets. Not necessarily in that order.Report

  4. Avatar Michael Cain says:

    Worth noting that impacts will likely be regional. For refined products, PADD 5 (states touching the Pacific, plus Arizona and Nevada) and PADD 4 (Rocky Mountains, less New Mexico) are largely disconnected from the rest of the country, and entirely disconnected from the Gulf Coast refining capacity. Even indirect effects should be small — the outside refineries that serve PADDs 4 and 5 are a long way from the pipelines the Gulf Coast refineries keep full. A useful piece of history might be the natural gas price spike that followed Katrina/Rita: it was pretty much a non-event in the West.Report