Katrina and Oil - Crisis Ahead?

Building on what I've already said about Katrina and it's potential impact on oil prices, I figured there was some more Cassandra-type stuff to say. Prof. Goose over on theoildrum is predicting that this storm will be a bigger deal than already expected. Ominously, his post is titled:"The Event that Introduces Peak Oil to a Nation." Take a look at the maps showing Katrina's projected path...lots of key offshore fields in the way, not to mention the Louisiana Offshore Oil Port.

This thing WILL be a big deal, not just because New Orleans is a prime target (remember water has to be pumped out of NO because it is under sea level, and right now with Katrina as a category 5, the estimates are 30 feet of water) under the current models for Katrina, but she could also disrupt Gulf supplies of petroleum (the GOM supplies around 1.3mbpd, we use around 20mbpd in the US) from rigs, etc., for a while. Many refineries are also located within this area (see LA refinery link below), as well as pipeline stations and tanker stops.

With supply and demand balanced on a knife's edge as it is, this could lead to huge amounts of volatilty in the oil markets for weeks to come.

In a recent post, Nouriel Roubini wondered whether the recent oil price runup would not lead to a U.S. and Global recession. He weighed the argument that a reason the recent runup in oil prices hasn't led to significant GDP growth slowdown was because it was demand-driven, rather than supply-driven. That is, that the strong economic growth fueling the demand was enough to offset any drag the rising prices would have on GDP growth. (Note that he wasn't terribly convinced by that argument to begin with) But now, if Katrina causes a supply-driven spike in the price of oil, there could be some serious repercussions.