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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

08 August 2006

A conspiracy in Prudhoe Bay?

Greg Palast never ceases to amaze me; this is his take on BP shutting production at Prudhoe Bay: “Why shut the pipe now? The timing of a sudden inspection and fix of a decade-long problem has a suspicious smell. A precipitous shutdown in mid-summer, in the middle of Middle East war(s), is guaranteed to raise prices and reap monster profits for BP. The price of crude jumped $2.22 a barrel on the shutdown news to over $76. How lucky for BP which sells four million barrels of oil a day.” (link)

Begin with the main error: BP does not sell 4 million barrels a day; it sells 4 million barrels of oil equivalent. Oil production, according to the company’s annual report, was closer to 2.5 mbd in 2005 with the rest being natural gas. (It is actually amusing to see him get this wrong given that he writes, in his bio, that he is “an energy economist.”)

Do the (big picture) math: 2.5 mbd x $2.2 rise in prices comes to $5.5 million a day. What about the loss? From the 400 kbd shut-in, BP is entitled to about a quarter (even less—92,000—by some estimates). So the loss is 92 kbd x $76 is about $7 million a day (even if you discount the oil price, given that Alaskan oil is heavy, the difference is still large). The monetary loss is larger than the gain (puting aside all other issues to reputation, etc.). This is hardly “monster profits.”

If you want to make more accusations, Mr. Palast, at least begin with getting your facts straight.

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