$100 Oil This Week

It hasn’t gotten all that much media coverage yet, but it is looking more and more like Mexico has taken a Katrina-sized hit that has devastated Tabasco. I had to go to The Irish Times for this:

Government offers aid to Mexico

A week of heavy rains over Mexico caused rivers to overflow, drowning at least 80 per cent of the swampy, oil-rich state of Tabasco. Much of the state capital, Villahermosa, looked like New Orleans after Hurricane Katrina, with murky water reaching to second-storey rooftops and desperate people waiting to be rescued.

There has been some mainstream media coverage, but so far the MSM is largely asleep at the wheel. Another story that emphasizes how this disaster has impacted Mexico’s oil industry:

Mexican President Calderon: Floods Cripple Mexico’s Oil Industry

Villahermosa, Mexico (AHN) – Mexican President Felipe Calderon on Friday warned it would take time to rebuild what has been devastated by the non-stop flooding plaguing the country, including the oil industry, which was crippled by the catastrophe.

“The storms have forced the closure of three of Mexico’s main oil ports, preventing almost all exports and halting a fifth of the country’s oil production. It has a strong economic impact” Calderon said in an interview.

The storm did not spare the Bay of Campeche, Mexico’s main oil producing region and home to more than 100 oil platforms. Overall, the region normally exports about 1.7 million barrels of crude daily. Since, most of the production remains shut down, it would mean that Mexico’s output would drop by 2.6 million barrels a day.

Some 800,000 families were displaced as floods submerged Villahermosa, the capital of Tabasco. More than 300,000 people were also trapped in their homes and rescue operations are still underway.

One hundred percent of the crops were destroyed, on top of the multi million worth of properties and belongings of people that were swept away by floods.
“It’s not just the worst natural catastrophe in the state’s history but, I would venture to say, one of the worst in the country’s recent history,” the President said.

Devastating. Where is the press coverage? 100 percent of crops destroyed? It’s a minor issue in comparison to the human tragedy, but this will probably be the catalyst to push oil on past $100 this week. I estimate the probability of that happening now at 85%.

2 thoughts on “$100 Oil This Week”

  1. I think oil bounces around for a couple of days awaiting Wednesday’s inventory report. If the news reports are accurate, imports will probably be sharply down, inventories will fall, and oil will run past $100. On the other hand, all of that may come true and we will see oil plunge $10. Sometimes the market just doesn’t make sense.

  2. It looks like something of a “perfect storm’ is brewing for oil bulls. Long-term global economic growth, and, until recently, a long run of declining oil prices.
    Then the 2000s. We still have global econoic growth, but oil prices going up. It takes years, even decades, to develop new supplies, and it takes years for demand to be dampened by higher prices. The groundwork is laid for a run=up in prices.
    Then, we get thug oil states, who do not practice Western-style management or government. Add in a few storms and wars, and the Bu$h dollar, and you have a perfect storm.
    It is a great time to buy some long-term puts on oil. I contend we are at generational high in prices. Somewhere around $100 a barrel. It is a traders market, a bull market, anything can happen.
    Demand for oil is no longer increaing, so the groundwork for a long decline is laid in. Wonderful new technologies are being brought forward in Western-style economies, from Japan to USA to Europe, and China. Look for energy demand to de-couple from GDP growth.
    In the lnger-run, there is one imponderable. Thug states control the world’s oil, and, unlike a decade ago, there is no headiness that the whole world will become a kinder, more democractic place. Indeed, the staying power of thug states is deeply saddening. Whole lives will be spent by people unable to speak freely, start their own shops, even wear what clothes they like, or hair styles. The future for women or religious minorities in Iraq, Iran, Libya, Pakistan, Afghanie, KSA etc is dark.
    Mexico is turning into a narco-thug refuge. Venezuela is a nutjob. We cannot depend on such countries for anything, especially oil.
    This is not Peak Oil, but it might as well be, or Peak Oil Lite.

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