Coup De Grace
Thursday, September 4th, 2008
James Howard Kunstler writes: As I write at 6:30 Eastern Daylight Time September 01, 2008, Hurricane
Gustave grinds out of the Gulf of Mexico to make landfall on the
Louisiana Coast at Port Fourchon, the marshalling yard for the oil and
gas industry — where the oil companies move people and equipment to
the rig zone offshore. The storm spent the wee hours of the morning
chewing through a wad of offshore drilling platforms and, perhaps more
importantly, the Louisiana Offshore Oil Port (or LOOP), where all the
oil supertanker ships from Middle East come to offload their cargos. It
will probably be days before we know what was chewed up out there –
not to mention the spaghetti-like network of pipelines that run all
over the shallow bottom to carry the oil and gas from the platforms to
the refineries just up the Mississippi corridor between New Orleans and
Baton Rouge.
So, at this hour nobody knows yet what the
outcome will be, either for the city of New Orleans and its suburbs, or
for the oil and gas industry. My guess is that enough oil and gas will
come off-line, be shut-in, or get disrupted to severely affect the
normal operations of America for a couple of weeks. At the
least, our just-in-time gasoline and diesel supply system will take a
forced time-out. Those refineries on-shore are in the path to get hit.
If they are damaged then we’ll probably see shortages of motor fuels
all over the eastern US.
If we see a shortage of motor fuels, we may also get a disruption
of trucking for the just-in-time food delivery system that keeps the
supermarkets stocked. So, there is a possibility that Americans will
experience both fuel and food shortages this back-to-school week — and
in some places it may be the not-back-to-school week if there is any
trouble getting fuel for the yellow bus fleets. There has also been
chatter about possible far-reaching damage to the old-and-fragile
electric grid if this storm trips just the right switches, but that’s
in the category of idle talk for now. …
Update, Thurs, Sept 04, 2008, the
state’s power grid sustained massive damage from Hurricane Gustav,
officials say, and it could be weeks before all of it is repaired.
Frustrated motorists poured back into the state hoping to return home,
only to be turned back at checkpoints on all the major highways. Many
grew frustrated as they roamed the state like gypsies or sat in motels
they could scarcely afford, their cash running low and no way to get
more.
Across the state, more than 1 million people were without
electricity, which meant gas stations were unable to pump fuel, ATMs
could not dispense money and restaurants could not open to feed people
still unable to return home. Communication was made difficult by spotty
cellular and Internet service.
Bloomberg reports: About 96 percent of crude-oil production in the Gulf of
Mexico and 92 percent of natural-gas output remains halted because of
Hurricane Gustav, the U.S. government said.
Energy producers
reported that 91 rigs and 599 production platforms still are evacuated
due to the storm, the Minerals Management Service said today in a
statement on its Web site. About 1.2 million barrels of daily oil
production remain shut-in, along with 6.7 billion cubic feet of gas.
… This hit, and the potential disruptions to
the everyday economy, could be the shot that finally pushes the
long-teetering banking system over the edge. Surely the insurance
industry, which is tied to banking and its worthless alphabet
securities, will not be in position to cover all its billions of
dollars in payouts. This may be what finally stops the game of musical
chairs in which insolvent banks pretend to be capitalized by showing up
for loans at the Federal Reserve’s teller cages. For instance, when
last seen before the Labor Day hiatus, Lehman Brothers was desperately
scrambling for life-support from anybody and anything with a few
billion spare bucks. As the hiatus ends and real-life reasserts itself,
Lehman may finally find itself free-falling into the abyss, and the
chain of mutual obligations, cross-collateralizations, and Ponzi plays
connecting it to the other banks could break, bringing on a domino fall
of insolvent banks and institutions. (09/04/08)
more…



