Schork Oil Outlook: Obama Should Copy Bush's Katrina Move
Obama and Mrs. Jones…
They have a thing going on/do they know it’s wrong? *
On Friday, the US State Department released a chart of international offers of assistance for the Deepwater Horizon catastrophe.
A total of 24 nations and several international maritime agencies offered resources; including people, booms, skimmers, dispersants and most importantly, vessels.
Outside of accepting minor assistance (some booms and skimmers), the chart clearly shows that the US government has by-and-large, declined international offers to help stem the flow of oil towards the U.S. coast, including vessels.
The Merchant Marine Act of 1920, better known as the Jones Act, precludes foreign flagged vessels from maritime commerce between U.S. ports; hence, the White House’s refusal to allow vessels from the European Maritime Safety Agency and from the governments of Italy, Russia, Sweden and Vietnam to assist with skimming and booming operations. (More: Foreign Nations Offer Gulf Spill Aid to US—for a Price)
This is kind of ironic. One of the few things the Bush Administration did right in the wake of Hurricane Katrina was to immediately suspend the Jones Act. This allowed for a virtual armada of foreign flagged vessels to flood the US market with European oil products. In turn, the post-storm spike in price was capped.
In the eight weeks following Katrina’s landfall, US imports of total gasoline supplies were 9.2% higher than the five-year average, inclusive of extended disruptions to GoM shipping channels in early October related to Hurricane Rita.
As such, despite the fact that 804 Mbbl/d of Gulf Coast (PADD III) refinery capacity was still shut-in through the first week of November 2005, average US gasoline prices at the pump (all grades) peaked one week after Katrina at $3.117, but were back below $2.25 by November.
Now fast forward from the "Neanderthal" days of Bush to the “postmodern enlightenment” of Obama. This was supposed to be the administration that was going to usher in a new era of international cooperation. The suggestion of The Schork Reportis to hit the reset button on the Jones Act so we can “mobilize” to combat the Gulf Oil spill.
*With apologies to Gamble, Gilbert and Huff
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.