Thursday, September 01, 2005

New Orleans is Gone

I have been in shock for the past 2 days. I cannot quite take in all the news from Louisiana and Mississippi. But at this point I am sure that Katrina is a very important event - not a world changing event in itself, but a turning point, an event that triggers many cultural and economic shifts that are ready and waiting. 9/11 was a politcal turning point, Katrina is bigger, it is a economic turning point for the USA, and therefore the globe.

Mayor Ray Nagins of New Orleans was saying it would be six months at least before they would get the city dried out and citizens could return. Well of course he has to say that, he doesn't get it yet. I don't think those people are ever going to get back. New Orleans is gone for good. Maybe they will save a bit of the french quarter as a little tourist village. Global warming destroyed New Orleans, and it is not going to cool down. Is the Army Corps of Engineers going to rebuild the levee and seawall system so half a million people can live below sea level? So they can sit and wait for the next category 4 hurricane? As the temperature in the gulf rises year by year? As the sea level itself is rising? This is very hard to believe. Who would insure it? They will probably build a new city on higher ground somewhere. I don't know the geography of the region. and all those smaller port towns, the ones destroyed will not be re-built. Towns not distroyed are living on borrowed time, and rising insurance rates, or the impossibility of getting coverage, will eventually make ghost towns of them.

The worst thing is that New Orleans will probably lose much of its industrial base as well. The many oil refineries surrounding the city, they were built in the 1950s through 1970s. They are obselete. They were built to process light sweet crude into relatively high sulfur gas and deisel. Now fuel standards are stricter, and crude feedstocks are dirtier. These refineries are barely profitable, inefficient, rust belt relics. They would require massive investment to upgrade them to process heavy sour crude. Oil companies might decide that the gulf coast is not the safest place to refine fuel, if the plants have to shut down for two weeks per year on account of hurricanes. Each mothballed refinery will become a toxic waste site.

And what about the drilling rigs out on the coast? No doubt one way or another, oil companies will find a way to get to that oil and gas, but it simply can't be business as usual. Oil production will not cease, but it will decline faster due to hurricane risk. Not all the wells in the gulf are equally profitable, and the recent dramatic increase in hurricane force changes the equations. Wells in or approaching decline will probably not be rebuilt. Oil rigs and platforms have taken enormous losses to hurricanes in the past two years and the ones that are rebuilt will have to be made very safe. This cost billions, and takes years. I keep reading about manpower shortages in the oil industry. Gulf shipyards that build and repair oil rigs are subject to hurricane risk. Probably only the most profitable rigs will be rebuilt, many will be abandoned.

All this will cause shortages in gas and oil, and refined fuels. Fuel will be very expensive. Katrina will jumpstart America's energy crisis.

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