The Oil Patch Cheers On Hurricane Dean

The price of crude oil is down some 8 percent since August 1. What the oil patch and every oil trader knows, one of the quickest ways to turn around this tumble is the drama of a good old fashioned hurricane in the Gulf of Mexico wending its way toward the Texas and Louisiana coasts. And Shazam! Here comes Hurricane Dean!

Hurricane Dean’s every little ripple will be reported by the oil industry flacks and their willing mouthpieces in the media. The crescendo of ominous events will be forecast and analyzed, all with a unanimity of purpose leading to higher and higher oil prices. Whether the storm actually hits or not, one thing is sure. The mere specter of the event will have the oil industry and the oil trading community cheering, “Go Big Dean, Go”.


A worst case scenario, should Dean gather momentum and do real damage, would be a temporary curtaiment of 2 to 3 million barrels a day, and that probably is a very big stretch. A dislocation of this magnitude for 30 days would be extraordinary. Daily production stoppages would rapidly diminish, so that by the end of 30 days they would be far less than those indicated, if at all.

And a very important point is that this is a temporary loss of production, not a loss of oil. The oil is simply not produced, remaining in the well to be pumped at a later date. And that is key.

Huffington Post