September 6, 2005

Well At Least We Still Have National Security*

A few months back I was in New Orleans. On my flight out I sat on the plane next to a person who tested the quality of oil for refinery companies.

I am fairly left wing and he was fairly right wing. That was obvious from the word go, and it didn't matter what or where our worldviews were. I realized neither of us were going to change in that regard.

I questioned him about the motives for the war in Iraq, and threw the oil card out there. He of course denied that.

The guy on the plane said he did not think extracting oil was the biggest problem facing the US, but that he thought the number and shape of oil refineries in the US was the big problem.

Greedy corporations like to be efficient as well, so why not operate near full capacity to maximize shareholder value? From the Dallas Federal Reserve bank website:

Since early 2003, gasoline prices have risen about $1.20 per gallon, with 60 cents of that increase coming in the last three months (Chart 1). Distillate oil (heating oil/diesel fuel) has increased by nearly as much as gasoline in the past two years. Rising crude oil prices and U.S. refineries operating near full capacity account for the gains in prices for both commodities.

There was an extended period of lower profit in refining oil. In recent years the profit per barrel increased 6 fold from $5 to $30, and investers have taken note:

Over the last year, decidedly old-economy oil refining has proved more attractive for investors than internet search.

Shares in Valero (NYSE:VLO), the largest independent US refiner, are up 226 per cent, compared with Google's 186 per cent.

Interesting to note that, because the recent hurricane knocked out many of the refineries:

"Some refineries likely (will be) able to restart their operations within the next 1 to 2 weeks, while others will likely be down for a more extended period, possibly several months," the Energy Information Administration said.

The Energy Department's analytical arm said nine major oil refineries in Louisiana and Mississippi remained shut from the hurricane. Those refineries account for about 11 percent of total U.S. refining capacity.

"Unlike 2004's Hurricane Ivan, which affected oil production facilities and had a lasting impact on crude oil production in the Gulf of Mexico, it appears that Hurricane Katrina may have a more lasting impact on refinery production and the distribution system," the EIA said in its most recent update on the effects of the hurricane on the energy sector.

Refinery supply is not going to get better soon. Why? The perception of scarcity increases profit margins:

Despite all the gas-guzzling SUVs that Americans have bought in recent years, current petrol prices should eat into demand. Yet on the supply side there is unlikely to be a rush to build new refining capacity. After so many years of poor returns, the industry is not about to flood the market with an investment splurge.

Hmm. So 1,000,000 people are homeless and the country is entering a deep energy crisis. Surely this is a national tradgedy and nobody is to blame, or...

With New Orleans under water and much of the Gulf Coast in ruins, President Bush is promising to do all he can to help. But just 48 days ago, his administration was actively opposing attempts to shore up the coastline where Hurricane Katrina made landfall. from Salon

Interesting to also note that the Homeland Security Department bled dollars from emergency response:

"FEMA had to compete and had to help finance the creation of the Department of Homeland Security," Tolbert, who now works for PBS&J, a private contractor, said Thursday morning. "They were taking chunks of money out of the budget. We always referred to it as taxes."

Last summer, for instance, Tolbert said FEMA staged a "tabletop exercise" in Baton Rouge, La., to gauge how well it would respond if a Category 3 hurricane hit New Orleans. Officials learned a lot from the role-play, says Tolbert, and then returned to their offices to create a new plan to respond to an actual disaster in the region. "Unfortunately, we were not able to finish the plan," Tolbert said. The funding for it ran out.

Is the Homeland Security Department a joke? Newt thinks so:

"I think it puts into question all of the Homeland Security and Northern Command planning for the last four years, because if we can't respond faster than this to an event we saw coming across the Gulf for days, then why do we think we're prepared to respond to a nuclear or biological attack?" said former House Speaker Newt Gingrich

Generally, stuff works better if you treat people humanely and do not lead them through fear, but when tradgedy strikes not everyone suffers the same. Not everyone wants everyone to do well. All sorts of fundamentalists believe they are entitled to what they have and that those who are doing worse than they are deserve what they get.

There are maps of the damage in aggregate, but that does not show the whole picture. It does not show people swimming away from their flooeded houses in poisoned oil rich water, the dead acting as alligator MRE's, or the babies just waiting to die.

Is this a national security issue? Well it was, but now New Orleans is under water.

It appears that the money has been moved in the presidentís budget to handle homeland security and the war in Iraq, and I suppose thatís the price we pay. Nobody locally is happy that the levees canít be finished, and we are doing everything we can to make the case that this is a security issue for us.

-- Walter Maestri, emergency management chief for Jefferson Parish, Louisiana; New Orleans Times-Picayune, June 8, 2004.

I guess that still does not stop other Americans from turning away those in need and the military from needing to shoot people.

Should the Homeland Security department more properly be named citizen exploitation and war mongering department?

This president is not my president. Louisiana is not a city. Unfortunately, going forward, the same may be true for what was once New Orleans.

Posted at September 6, 2005 1:07 AM
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