Gas Prices Could Go Up - Way Up

June 6th, 2007

By Rowan Wolf

Hold onto your hats folks. Gas prices could skyrocket shortly due to cyclone Gonu which is hitting Oman and heading into Gulf of Oman. This could have a significant effect on oil fields, production facilities and shipping. There is an extensive discussion at the Oil Drum at this link and the most recent thread at this link. I will try to summarize the high points.

Gonu has hit Oman and is heading on into the Gulf. The reports range from this being the most powerful storm to hit Oman in 60 years, to reports that no cyclone has ever entered the Gulf of Oman. Storm surges of 10-15 feet are expected to hit the coast of Iran. This will definitely impact shipping in the region - even oil shipping.

According to Oil Drum, Oman produces 774,000 bbl/day, and their operations could be impacted for 30 days or more. Combined with other likely impacts in the Gulf of Oman, there could be a drastic reduction in oil movement out of the region.

The image below - Courtesy of Wired News, looks at reasonably current gas prices around the world.

By Rowan Wolf

You can visit the Hurricane tracking center to see the updated path and impact of Gonu. It is about 3/4 down the page. and then look at the USGS Interactive Map of Geology, Oil and Gas Fields of the Geological Provinces of the Arabian Peninsula.

Given that the world is running on less than a 2% margin of supply and demand on oil, even an insignificant disruption could hit hard. If the Oil Drum estimates of at least a 30 day disruption in Oman happen, then threats of $4 a gallon gasoline prices in the US this summer could easily increase by 15-20%. That would put us closer to $5 a gallon than four.

Thanks to the folks at The Oil Drum for the extensive information.

Entry Filed under: NEGATIVE SPACE, RESOURCE WARS