The energy crisis of 2005 refers to the marked rise in the price of oil, gasoline, and other energy prices. This was triggered when Hurricane Katrina substantially impacted refinery and distribution capacity during the beginning of September 2005. The changes were seen by some to be a manifestation of "peak oil" or at least of portending of the possible economic effects of sustained reduction in fuel supplies. [1] The crisis was preceeded by increases in oil prices starting in 2003.
Awareness edit
Initial reaction was that rapidly climbing prices were primarily due to a shortage caused by closing of production and oil refineries in and along the Gulf of Mexico. The public became increasingly aware of the crisis as gasoline prices in the USA rose to over $3 per gallon, with some prices reported as high as $6.00. Over two years, gasoline prices in the USA doubled. During the same period, oil prices increased, with oil futures up to $70.85 per barrel.[2]
Various articles were written globally concerning the oil crisis [3], peak oil [4], and the Hubbert Peak Theory.
Shortages were feared or experienced in several states including Tennessee [5], Alabama [6], and South Carolina. [7] Many of these were blamed on panic buying. Airports began to report shortages in aviation fuel on 2 September.[8] A shortage could lead to a decrease in food production.[9] Higher prices for heating oil and natural gas were expected as the winter heating season set in.[10]
Presidential address edit
On 5:10 p.m. EDT, on 31 August, President Bush announced that the "recovery will take years". He listed all of the efforts currently going on to help in the aftermath of the hurricane. The President listed three priorities; 1. save lives, 2. ensure adequate food, water, and supplies get to those effected, and 3. comprehensive recovery effort to repair essential roads and bridges.
He said that the Energy Department is approving loans from the Strategic Petroleum Reserve and that the EPA has granted a nationwide waiver for fuel blends, to help increase national gasoline and diesel fuel availability. Bush stated, "This storm has disrupted the ability to make gasoline and deliver gasoline," and "This is going to be a difficult road."[11]
The administration of the USA, led by the President, decided to provide oil from the USA's Strategic Petroleum Reserve to refineries in order to keep up with demand for gasoline and other oil products.[12] Many people have observed however that stores of crude oil do little to address inadequate refinery and distribution capacity.
Stock markets edit
The increase in oil prices over two years was mirrored by an increase in stock values in the energy sector. The value of the stock in companies such as Apache[13] and Conoco-Phillips [14] rose sharply during this period. This prices increased more rapidly toward the end of August, particularly after Hurricane Katrina. [15]
Wal-mart continued its decrease in value which began with the increase in the oil prices. Over two years, stock in Wal-mart dropped in value by 25% from $60 per share to under $45 per share.[16] Earlier in August, Wal-mart announced that higher than expected oil prices cut into the corporations profits for the 2nd quarter of 2005. Since oil prices after the end of the 2nd quarter continued to rise, 3rd quarter profits from Wal-mart are expected to be small. Because Wal-marts distribution system relies on the customer to spend a relatively large amount of fuel to drive to a large discount "box" store, increases in the price of that fuel will encourage shoppers to save money by shopping in community stores closer to home.
Global Reaction edit
In order to stabilize world energy supplies, the International Energy Agency offered to sell two million barrels of crude oil and other refined products from national supplies. These supplies would begin entering the US markets within two weeks of 2 September. [17] [18] The press release from the IEA states, "... the implications for the oil market are global."[19]
- The oil market in normal times "is very fluid across the Atlantic and when there is a crisis in the United States, prices rise on the US market and that leads to more oil companies selling in the United States than in Europe," said IEA's head Claude Mandil in an interview with French newspaper La Croix.[20]
International Effects edit
The Pacific rim had been experiencing the crisis prior to Hurricane Katrina. In the Philippines, the oil crisis caused its public to call for immediate government assistance. [21] New sources of energy were sought to deal with the crisis.[22] A senior minister of Singapore expressed concern at the oil crisis in Indonesia.[23] The Indonesian president had instituted subsidies to control the price of gasoline.[24]
Venezuela's president, Hugo Chávez, came under increasing scrutiny as he began selling oil at lower-than-market prices to island nations in the Carribean. [25] At the same time, Cuba experienced electricity shortages.[26]
Iran came under increasing pressure from the European Union in regards to their program to build nuclear power plants.[27]
See also edit
Supply edit
- Hubbert peak theory
- Oil depletion
- Energy crisis
- 1973 oil crisis
- 1979 energy crisis
- Oil price increase of 1990
- Oil price increases of 2004 and 2005
- Future energy development
Economics edit
Shortages edit
- North Korea - Famine following loss of oil imports from collapsed USSR
- Cuba - Local agriculture following USSR collapse oil crisis
- Great Leap Forward - Effects in China of a rapid loss of energy in agriculture
Entertainment edit
- Oil Storm, a movie made for FX Networks that anticipated certain of the events