NYT/AP: Oil Prices Spike on News of BP Shutdown

[DeepModem Mom]

Oil Prices Spike on News of Shutdown
By THE ASSOCIATED PRESS
Published: August 7, 2006

LONDON (AP) -- Oil prices jumped by more than $1 a barrel Monday following a production shutdown at an Alaskan oil field that accounts for about 8 percent of U.S. production.

The news of the Alaska shutdown caught traders by surprise, said Kevin Norrish of Barclays Capital, who added that the current ability to compensate for lost production was ''severely limited.''

Prices were also rising due to worries about how fighting in the Middle East could affect supplies.

BP Exploration Alaska Inc. began shutting down oil production Sunday at Prudhoe Bay due to severe corrosion on a pipeline.

Once the field is shut down, in a process expected to take days, BP said oil production would be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production as of May 2006, according to data from the U.S. Energy Information Administration....

http://www.nytimes.com/aponline/business/AP-Oil-Prices.html

[marmar]

1. Now there's a shock....

More extortion from the oil companies.

[Democrats_win]

2. All our eggs are in Iraq, we can't fix a leak in America.

[kurth]

3. Well, it takes money to prevent corrosion

and oil companies are having a cash flow problem right now.

[5X]

8. Yeah, they can't keep up with the flow,

they are too busy counting their money to fix things.

[w4rma]

4. The oil companies let their equipment fail, spill oil, then jack up prices

They get paid *more* for their "incompetence". Too few companies control all the oil.

[Tandalayo_Scheisskopf]

5. Exactamundo.

Take a look at their infrastructure maintenance investment of late.

[Breeze54]

10. What "investment" ?

:sarcasm:

[marmar]

6. I believe they call it "externalities."

Let the people and the government pay for our fuck-ups.

[RamboLiberal]

7. Repubs must be worried about November

Just heard a news report they are probably going to tape the Strategic Reserve.

[tandot]

9. they have record profits but refuse to keep their pipelines maintained

and we should trust them that they'll not destroy ANWR if they'd get a chance to drill there?

They are all greedy bastards whose only goal is to enrich themselves and their stockholders. And this administration is in full support of them - and against us and the American people :mad:

[lumberjack_jeff]

14. Deferred maintenance doesn't cost them money, it makes money.

[unc]

19. These massive profits were only recent.

For the past three decades since this pipeline has been open, profits were generally not so high, especially for about two decades (80's and 90's). These low profits (if profits at all) forced cuts in maintanance. Fixing and maintaining pipelines is not a short term program but a continuous long term program. You can't expect short term profits to heal decades long damage to the very old pipeline.

[tandot]

32. sorry it took me so long to respond. I had to get some tissue to wipe away

my tears. Those poor gigantic oil corporations. Where can I send my donation to them?

Please define "generally not so high" - or did you just read from the right-wing talking points they send out to the gullible? :crazy:

[unda cova brutha]

28. the govt should just take the pipelines away from big oil

they are not fixing them good enough and spill ing oil all over the place. I would like to see them shut down.

[seafan]

11. Pardon my cynicism, but, 1) *Corrosion* takes a while to develop

....and inspectors would have had plenty of time to observe a growing problem with a section of pipeline in an Alaskan oil field, to address it before now.

2) Shutting down this line *now* will drive up prices (to benefit *Co).

3) Shutting down this line *now* will increase the already heavy pressure on coastal states to allow drilling close to shores. WE MUST DRILL! WE MUST DRILL! WE MUST DRILL! (*Co benefits, once again.)

4) Shutting down this pipeline *now* will steal even more money from Americans at the fuel pumps.


I dare to make the comparison here that this is all part of the final assault on Americans, by a disintegrating *malignant conservative ideology*, as these criminals are setting fires to the businesses, homes and victims that they have just looted, robbed and raped.

[kurth]

13. BP hid rampant safety and environmental problems (Houston Chronicle)

''Dig here," the worker said, pointing at the ground in the middle of the chemical plant near Joliet, Ill. Hours later, managers uncovered an open sewer line leaking wastewater from the plant into the ground. The broken pipe had been reburied by the plant's former owner.

The incident occurred about two years ago after Flint Hills Resources, a unit of Wichita, Kan.-based Koch Industries, bought the 1950s-era plant from BP for $225 million, a lawsuit filed in Chicago last year claims. The court documents outline a litany of similar allegations in which Flint Hills claims BP hid rampant safety, environmental and operational problems at the plant. At least 29 parts of the plant were not structurally sound or maintained according to normal standards, Flint Hills claims in the suit. Of the 14 emission sources at the plant, 11 violated environmental standards, the suit says...

Even as BP is offering assurances that it will fix its lax culture of safety and environmental compliance, the allegations in the lawsuit underscore the potential pervasiveness of the company's problems across its North American operations. Flint Hills' claims related to the chemical operations in Joliet fit a pattern of BP's problems that stretches from the refinery blast in Texas City that killed 15 workers last year to the pipeline leak in Alaska that's the subject of a criminal investigation...

http://www.chron.com/disp/story.mpl/headline/biz/4096334.html

[unc]

18. Tell me

how is it going to help them increase profits, seafan?

Let's do a little math, shall we?

BP produces 2 mpd (that's million barrels per day). This shut down results in a loss of 400 kpd (thousand barrels per day), or about 25% of their overall production. In order for their profits to even be the same, the price of oil would need to increase by at least 33%. A 33% increase in the price of oil would put it around $100 a barrel, which no one is even thinking it will occur based off of this single event. And that $100/barrel is needed for BP to just keep their profits the SAME. Since it won't get there based off of this, they will LOSE money, not make more.

[Alcibiades]

26. On a per unit basis

Profits will be much higher. While this single event may not increase oil prices to $100 per barrel, it will cause uncertainty about the ability to bring Alaskan oil to market, which will cause the markets to move higher than they would through the scarcity effect alone.

This isn't the only place where BP gets their crude. A drop in production at Prudhoe Bay makes all their other oil more valuable. That being said, I doubt this is the result of a conspiracy. Ineptitude is more likely the cause. We've been producing oil up in AK for over 30 years now. You'd think the kinks would have been ironed out.

[TheFarseer]

40. They still get to sell that oil

just not right now. They only spilled 5 barrels or so, I heard. Shut down and then start pumping again when the price is higher. I'm not saying they did this on purpose or anything, but they are not losing money on it.

[Ragin_mad]

27. No matter when they would have addressed it

It would have required shutting down the line for the repairs.

[jpak]

12. Just heard that ChimpCo is going to tap the Strategic Petroleum Reserve

to make up the difference...

[cliss]

15. Yes, the oil companies are making

record profits. ....but it's not all wonderfulness.

Consider this....

1) Every time gas prices go up, people hate George Bush just a little more. His approval ratings are inversely related to the price of gas. And that includes all the Repubs, too.

2) Consider election time in November. How are people going to feel about their elected representatives, while they are paying $4.50/gallon? They are going to throw them out, that's what. Most of the oil companies are Repubs, so they've got to be worried.

3) Elasticity of Demand and Supply. The more the price of oil goes up, the more people will be looking for alternatives. All sorts of alternative fuels will be considered: ethanol, cooking oil, anything. People will start seriously thinking about conserving. They will start sharing rides, carpooling, fuel-efficient cars will be the stars.

5) The Oil companies can only rake it in over the short term. Over the long term, they are in trouble. The more they pull in over the short term, the more they assure their own downfall.

[earthmama]

16. that is all good but ...

in the meantime there are alot of people that can not feed their families cause they can not afford to get to work and not able to afford the cost of food going up. IMO that really sucks.

[kurth]

17. Exactly. Mass transportation in the U.S. sucks

Most American workers have to drive to work and are not served by mass transit.

[AntiFascist]

34. The elasticity of supply and demand is the key thing...

but it isn't working the way you imply. The fact that gas prices can approach $4.00 in some areas, and oil companies still make record profits means, from a purely economic point of view, that oil prices have been too cheap. This means people generally care more about driving their monster trucks and SUVs than they do about gas prices, global warming and conservation, etc. What really needs to happen is for the transportation costs to start affecting the economy in a major negative way, then you'll see Republicans really start to react.

[louis-t]

20. Funny, the article never mentions the oil spill created by the "corrosion"

Just sayin'....

[unc]

21. You sure, louis?

BP Exploration Alaska Inc. began shutting down oil production Sunday at Prudhoe Bay due to severe corrosion on a pipeline.

[louis-t]

22. Says "corrosion". No mention of the oil spill.

Found another article that mentioned the oil spill, but not how big it was. Can't find it online, it was in my newspaper.

[unc]

23. Oooohhhh.

I see what you meant. Sorry. But I believe it was only a few barrels of oil in the spill/leak. http://www.msnbc.msn.com/id/14219844/

[Outlier]

24. I'm surprised and happy

they found the spill before it got to be to big. I guess oil is to valuable to just let it spill on to the ground. I agree with the comment above, this will be used to justify more drilling off the coasts.

[louis-t]

36. Ahhh, thanks for the link.

I've been trying to find out how big the spill was.

[_testify_]

25. Total BS as far as I'm concerned

[Miss Chybil]

38. It's all part of the plan. The less oil we have the richer these guys

get.

[profgoose]

29. yeah, it looks like Prudhoe Bay is going to be down for "months"

BP is talking about this thing being down for months: Link to MarketWatch

We're talking about it over at The Oil Drum if you're interested.

[johnlal]

30. Things you can do to fight back.

Buy ONLY GAS at a gas retailer. Don't by candy bars, soft drinks, lottery tickets, hot dogs, cigarettes, beer, or any of the other items they sell. These are the things that make money for the retailer.

Buy your groceries and food at a grocery store. (Remember, though, if a grocery store sells gasoline, don't buy gas there, only food).

Buy cigarettes at a tobacco shop.

Buy beer at a liquor store.

Buy fast food at a restaraunt.

Buy lottery tickets anywhere that doesn't sell gas.

To be effective, consumer action must be focused at the point of sale. I know that the fatter cats are higher up in the distribution chain, but as consumers, it is harder for us to reach that high. We have to make ourselves felt at the retail level. Let the gas station owners' pain trickle up the chain.
In the meantime, report any gouging to the proper authorities, and keep writing to your congress people.

[Ragin_mad]

35. And what exactly does this do ?

Other than use more gas driving to specialty stores all over the place rather than one trip to one store.

[PATRICK]

31. This is the same BP

(sorry of this has been already over-mentioned) that just got their dirty underwear hung out to dry on cornering the natural gas market and fixing prices to make a huge windfall profit???

Is this embarrassment/coincidence any part of any reportage by anyone in the MSM?

[Barkley]

33. Its the California 2000--01 energy crisis all over again

back then energy producers were shutting down for everything from scheduled maintenance and plant closures to fires...

We were told back then that demand has driven up the price of energy: and no new energy plant had been build in the state since 1969.

Meanwhile the L.A. Dept of Water and Power, which was not part
of the 'dergulation' plan not only produced enough for L.A. it sold energy to other cities.

Gray Davis bought long-term energy contract (at inflated prices) but lights came on again.

Energy companies, like Reliant and Duke energy made record profit too.

Ultimately, we discovered that Enron et.al. were indeed manipulating the system.

I predict if a sizable Democratic Congress is elected in Nov. the price of gas will fall dramatically.

Why?

The 'threat' of a REAL investigation into scamming and price gouging will be more likely.

[Festivito]

37. Didn't a spill about year ago NOT result in a shutdown?

Funny how now, just as the Saudi fields wane, our guys make a slow environmentally friendly shutdown. And, the reason is that hurricane again, well, hurricane threat.

That's why prices go up. NOT the dollar, NOT the M.E. turmoil, NOT the Saudi fields near empty. DON'T look here. Nothing to see. Move along.

[Thor_MN]

39. BP = BRITISH Petroleum, no?

The purchasers of AMOCO, or AMERICAN Oil Company...

[threadkillaz]

41. The British are coming. The British are... er.. here.

nt

[krkaufman]

42. BP = British Petroleum. Yes.

And, yes, Re: Amoco "merger."

[Styxiv]

43. Ya'll forgot one thing

Not to mention which makes this all kind of funny( not ha ha funny either) is typically we see the price of gas go up during the DRIVING months (summer runup).

THEN magically the price usually drops in the winter months as demand drops thus forcing a drop in the price at the pump in years past that is, (they say this EVERY YEAR) well now between hurricane season and troubles like BP is having the oil companies now has an excuse (opps I mean reason ha ha) to keep the price high all year round.

And since TS Chris showed so far they might not be able to rely on hurricanes as a steadfast excuse (as we saw the price jump on fears of TS chris) and Then nothing came of it so ya gotta have a back and lo and behold a shutdown pipeline.