As hurricane Issac storms into the U.S. Gulf region damaging a major oil refinery and Venezuela experiences extensive fire damage at a major oil refinery caused by a gas leak cutting production of all oil related products in both regions. What will happen in those key economies and what will be the outcomes for the consumer and users of this valuable commodity?.
It may be said that interrupted or much lower than expected production of fossil related products will cause a hike in the prices of diesel, petrol , plastic and nylon products. Offsetting in the short term oil producers and refiners revenue who are unlocking their reserves as a supply counter-measure. The immediate affect on retail sales as will put financial limits on consumers spending power as corporations take a short term advantage of this difficult seasonal storm.
These events should show a rise in fuel at the pumps in the U.S and a reduction in the price of crude oil especially from the Gulf States with slower than expected U.S. manufacturing output; as higher prices cut into inventory sales.
If lost refinery production exceeds slack production and stored reserves at other refinery facilities into November then unemployment may result at the back end of this fall. Possibly affecting the U.S. election outcome, currency rates and GDP. Perhaps stormy waters are a head for the U.S. and Latin American industries. So yes the price of crude should fall in an already recession hit industry. Perhaps prices closer to those seen a decade ago will help fuel yet another global recovery. This might be the right 'straw that brakes the camels back' for the oil industry that could drive economies back to recovery in the longer term if supplies of oil products become protracted.
Weak economic growth and high oil prices are likely to contain global oil demand in 2012 and cap it in 2013, the International Energy Agency said on Wednesday.
