OPEC is/will be decreasing production...then dramatically, as they realize the potential impact of y2k ! Doesn't it seem logical that they will hold out for FAR HIGHER PRICES WHEN DEMAND SPIKES UP DUE TO Y2K DISRUPTIONS!
Yes, if there was a sudden depletion in fuel stocks, there would be a spike in oil and fuel prices. But to counter that, you are quite correct in assuming the gov't would institute price controls and rationing. Americans suffered through rationing for years during WWII as you correctly note, I don't see why we can't survive a 3-6 month disruption of production and refining capacity.
Then, it will be every oil-producting country for itself! For example, 2-5 (assume all 5) Venezulan refineries will be shut down, (there alone goes 15% of our oil imports- finito!)
Uh Ken... I don't believe we import much in refined products from Venezuela. There is a major difference between an already functional and established production operation and the much more complex refining operation.
thus Nigeria or Saudi Arabia, e.g., will see 70s levels profits obtainable again as the demand /supply ratio will skew the opposite way!
They may see the potential for those profits, but if they are shipping crude, they aren't collecting revenues.
Also, the US pumps some 1.3 million barrels per day from all of those little "rocking horse" stripper wells you find in Oklahoma and Texas.
Each pump out about 10-50 barrels a day.
Part of the rationale for adding oil stocks to the SPR was an attempt to subsidize these operations. Once a stripper well is shut down, it is cost prohibitive to reopen the well and you effectively lose that major source of domestic production.
Further, forget Alaskan oil- one hour of the pipeline freezing (anyone think about how chip problems will affect that?), and goodby Alaskan oil....indefinately.....
This is an interesting point. A lot of it will depend on the manual fail-safe mechanisms they have implemented. I have little doubt that if pipeline operators don't feel 100% certain about their operational status, they won't be shipping oil. They'll send down the "pigs" to clean 'er out and do an appropriate function test in January. They're not gonna be stupid enough to risk billions of dollars of equipment and a potential environmental nightmare taking a chance pumping oil. And that oil wouldn't enter the refining systems for two-four weeks anyway.
Btw, I don't believe there were an extraordinary amount of chips in use at the time the pipeline was built. But later upgrades may result in problems.
Ken, when you're analysing the potential effects of Y2K, you shouldn't disregard the actions that Gov't can take to maintain order and social confidence.
Regards,
ron
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