A One-Two Punch to a Glass Jaw: the Knockdown of Recession (September 24, 2005)
Take a look at the false-color image of Rita from the NOAA Storm Tracker site, tearing through oil platforms on its way to the coast. Now tell me this one-two punch to the delicate glass jaw of the region's oil refining and natural gas complex is no big deal and the U.S. economy will barely notice it. Unbelievable, but that malarky is the official Wall Street line.
I have personally witnessed two well-publicized natural disasters, the Loma Prieta Earthquake of 1989 and the Oakland Hills Fire of 1991 which destroyed 3,000 homes. Although the loss of life and property was tragic, these two events were chump change compared to the damage wrought by these hurricanes. More importantly, these S.F. Bay Area disasters had virtually no effect on the rest of the nation. Their influence was entirely local.
Contrast that with the destruction wreaked on the nation's oil and natural gas complex by Katrina and Rita. The scale of damage and the expense of repairing the damage are beyond ready measure; everyone is relying on back-of-the-envelope estimates which aren't even close because the full damage hasn't even been totalled. Nobody can say how prices of gasoline and natural gas will be affected next month, never mind next April, because no one can say whether foreign refineries can compensate quickly enough to suppress prices. We already import 1 million barrels of refined fossil fuels every day, and it simply isn't possible to ramp that up overnight by another million barrels.
But don't take my word on it; read a blog written by industry insiders. Katrina and Rita will disrupt essential refining capacity and the delivery of natural gas for many months; the facilities, tankers and pipelines to carry enough product to minimize that impact simply do not exist.
Put another way: the recession of 2006 just started.
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copyright © 2005 Charles Hugh Smith. All rights reserved in all media.
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