TPT September 2008

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From the AmericaS
131 September 2008 ›
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.
Mexico’s Pemex sees a windfall
turn into a shortfall
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
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