TPT September 2008
From the AmericaS
After Hurricane Katrina struck the Louisiana coast, nearly 2 million barrels per day of refinery capacity was shut down because of direct damage or interruption of power supplies. A total of more than 4.9 million bpd of refinery capacity was shut down after Hurricane Rita hit the Texas coast. In June of 2008, the EIA made public the Atlantic Hurricane Season Outlook prepared by the National Oceanic and Atmospheric Administration (NOAA). Highlights of that report are summarized here: • NOAA projects 12 to 16 named storms will form within the Atlantic Basin, including 6 to 9 hurricanes, of which 2 to 5 will be intense [Note: a named storm generally refers to either a tropical storm or hurricane. An intense hurricane is one rated as category 3, 4, or 5. A moderate hurricane is classified as either category 1 or 2.]. • Above-normal hurricane activity in the Atlantic is likely to correspond to increased impacts on offshore crude oil and natural gas producers in the Gulf. However, the range of potential production outages is quite extensive. • On the basis of a Monte Carlo hurricane outage simulation (conditional on how NOAA’s most recent predictions for the level of Atlantic basin hurricane activity compare to historical activity), EIA expects a total of about 11.3 million barrels (bbl) of crude oil and 78 billion cubic feet (Bcf) of natural gas to be shut in during the 2008 hurricane season. It stands to reason that surging oil prices would cut into the profits of companies that use raw materials derived from oil. But it is remarkable that the steady climb in the price of oil to record highs has not generated a bonanza for the Mexican state oil monopoly, Petróleos Mexicanos. Mexico is, after all, the world’s sixth-largest oil producer, and Pemex might have expected a bonus in these times. Writing in the New York Times on “the spat over the missing windfall,” Elizabeth Malkin cited an impasse not surprising when most of Mexico’s 31 states as well as Mexico City, the capital, are governed by opposition parties. Mexican law dictates that a percentage of extra money from high oil prices be distributed to state governors to be spent on public works, but government technocrats and opposition politicians differ widely on the law’s application ( ‘Mexico, an oil producer, hasn’t benefited from soaring prices,’ June 7). Noting the government’s conviction that Pemex does not have the revenue it needs to find, pump, and refine more oil – hence the missing profits – Ms Malkin wrote, “The left-wing opposition argues that [President Felipe Calderón’s] plan, which would streamline procedures for outside contractors and reward them for finding new oil, is a disguised attempt to privatize Pemex. The left believes the government is manipulating the figures to make Pemex look worse than it is in order to bolster the case for private investment.” Whatever the merits of this view, many outside analysts accept the government’s explanation for the vanished windfall: an unfortunate shortage of product in a period of brisk demand. A rather liberal exercise of guesswork would also appear to be a factor. Ms Malkin Mexico’s Pemex sees a windfall turn into a shortfall
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S eptember 2008
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