Rigged to Blow

[phantom power]

I like the phase-change analogy, and the earthquake analogy. Inelastic demand for oil builds up tension, like two locked-up tectonic plates. This produces the illusion of stability, when in fact it is just the set-up for a major earthquake.

I also see him echoing a point that some other DUer made last week, which is that the lack of investment in new refineries is consistent with an industry that knows it has no future. If you know you are in the end-game, it's optimal strategy to waste no money on new infrastructure, which yields the additional benefit of a final profit blow-out due to inflated prices.

For the moment, America is being subjected to the slow squeeze on gasoline prices, rather than a sudden sharp shock, with the pumps now averaging $3.09 nationwide. But there's a lot tension accumulating in the process. Gasoline prices are going up remorselessly now mainly because of bottlenecks in the refinery sector. Demand has gotten so high -- we are driving so much, regardless of up-or-downticks in measured economic activity, because the way things are laid out we have no choice -- that our existing refineries are operating at over 90 percent capacity (when they are running). This has led to the deferral of a lot of routine maintenance, so the refineries are either running flat-out or they're not running at all.

Most of our oil refineries are more than fifty years old. The metal in their pipes and retort vessels is fatigued. Things break. The companies that sell gasoline, like Exxon-Mobil, realize that they are in a "sunset" industry, so they are not interested in investing any fraction of their currently enormous profits in new refineries (especially when they can use that money to buy back their own stock and jack up the share price). Besides, the public regards oil refineries as obnoxious, and if a new one were even proposed somewhere, an army of NIMBYs would arise and march on the local zoning board to oppose it -- so why bother?

(...)

Events in geopolitics -- things that happen "above the ground," as they say in oil circles -- seem kind of stuck for the moment. We forget that these things become unstuck rather suddenly, through slippage, or a process like phase change in physics, where conditions persist -- until suddenly they don't.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2007/05/rigged_to_blow.html

[skiddlybop]

1. Oh. I thought you were referring to Patrick McHenry.

http://www.blogactive.com/2007/05/not-just-one-voter-in-question-at-rep.html

Another closeted conservative republican treating his staff like they are altar boys...