Could The Oil Price Go Down?
I'm writing this Sunday eve as the price of oil has already jumped to $70 and I got to thinking about that.
These are not predictions, just thinking out loud. Sounds like many here know far more about the Gulf oil and gas than I do, so I'd like to hear your thoughts
Let's say Katrina is really bad. Could it be that US demand for oil would fall faster than supply? It seems to me refining capacity is the key issue. From what I could find quickly on the web, it sounds like Gulf of Mexico accounts for about 30% of US oil production, but close to 50% of refining capacity.
Assuming production and refining capacity get damaged equally, couldn't US demand for oil go down faster than supply? Even if other countries offered to give the US more oil as a goodwill gesture in time of need, and even assuming that the tankers could get into ports, what could the US do with the oil? Other refineries nationwide are running at full tilt already.
Yes, unleaded gasoline prices in the US might go very high for a time. But that's different than crude oil. Couldn't high gasoline prices even further lessen the demand for oil as people tighten their belts even further?
And to reassure everyone, the President might come out and say this is an emergency and we'll use the Strategic Reserves if we have to.
Demand for oil is high in other countries, but I wonder how much of the lessened US demand they could make up and how quickly.
Immediate panic-buying seems almost a certainty for a day or a few days. But after that, and over the short-term, could the price spike in oil be down instead of up?
Again, I'm just thinking out loud here. Mankind has an amazing ability to get through disasters, and get things back up and running again. And obviously we're all hoping for minimal loss of life and property.
But if we assume a relatively worst-case scenario, does it logically follow that the price of oil has to go up?
