Friday, September 30, 2005

A Long Cold Winter Is Coming.

I’m writing this as a service to you, kind reader . . . especially if you are a Yankee live in a Northern climate.

(By the way, although I'm not an energy industry insider, much of my family's income comes from oil. So I know a bit more about how the energy world works than your average guy.)

Your heating bills will be double last winter’s – if you’re lucky. Rita and Katrina really has put that big a hurt on our energy situation for the next few months. You see, this time of year, between Labor Day and Thanksgiving, is when energy companies increase their inventory of winter heating fuels, such as natural gas and heating oil.

But instead inventories are shrinking because of most of the Gulf of Mexico’s oil and gas production is shut in from the two storms. Not only that, but a number of damaged refineries are not producing either. And this situation will persist. The Gulf energy complex is a logistical mess right now. Here’s one report yesterday from the very level-headed Christopher Edmonds over at

100% of oil production and over 80% of natural gas production in the Gulf of Mexico remains offline as of mid-day Wednesday. I continue to hear that it is nearly impossible to get transit back to platforms and rigs, as helicopters and boats are booked and refueling is a challenge. So, look for these numbers to remain surprisingly high for the next several days as the task of repopulating the GoM is more difficult than most pundits thought.

Again, this is happening at a time when inventories normally are increasing. Not only that, but gasoline inventories need to be rebuilt in Texas after the Rita evacuation mess. That will also take away from building heating inventories. There just won’t the normal inventory build this Fall. If this is a cold Winter . . . well, you get the picture.

I like you . . . well, most of you people. So please get prepared for the consequences to your utility bills, and, yes, your investments, too. I might be wrong that this situation will hurt stocks, but I’m getting ready to do some selling myself. Ruinous energy bills and possible fuel shortages don’t a good economy make.

But there are two things that you must NOT do:

1. If you have either directly or indirectly made it difficult to build needed refineries and increase energy production outside the Gulf Coast area, then ABSOLUTELY NO WHINING FROM YOU! The Yankee, Left Coast people who make it difficult to do something about our energy situation are the very same people who whine the most when their energy bills go up. Don’t be one of them, or I will laugh at you as you freeze this Winter.

2. You all cannot come to South Texas to live with me this Winter. Sorry.

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