Un-Easy

In light of what probably is the largest natural disaster of US history we have put aside comments on longer term resource trends to focus on Katrina and its wake. Recrimination seems to have found a place that should be filled with resolve. That we find as troubling as the storm was tragic. To the million displaced souls we can only add our hope that with some focus having appeared, each can now grieve and seek out a semblance of normal life quickly. Efforts continue to rescue the last of tens of thousands stranded by breached seawalls in New Orleans. The direct impact of Katrina's passing was most heavily felt along the Gulf Coast east of New Orleans, literally flattening the waterfront in much of Mississippi and flooding part of Alabama. The human cost of this disaster is obviously enormous, and the more so with a weak initial response. In an age when 24-hour news tends to exaggerate, Katrina's build up seemed mild. Even after gathering strength and sweeping over the Gulf coast it seemed manageable. First appearances misled. We are no ones' apologist, but do feel this needs recognition. Yes, rescue was too slow to get started, but not we think from indifference. What the world has witnessed has in fact largely been the inertia of an elephantine bureaucracy attempting to turn and focus. Katrina's progress may have been acting out its own place as metaphor - a glancing blow to a centre that seemed ready for its full brunt lulling an overly prepared bureaucracy into misreading damage by its wake. A storybook giant killer. At an individual level, many witnesses to a tragedy are less likely to bring aid then is a single witness who realises he or she has to act if anyone is going to. From a Canadian perch, where Mounties still police for all levels of government in many areas (including parts of suburban Vancouver), the countless number and variety of uniformed and armed services in the US has always been mind boggling. A multiplicity of US services meant to control government may well have overbalanced in this situation. Add to this the re-direction of many of them to terrorist watch, and makings of tragedy on top of disaster were laid. And the world has had no sense of how to respond to this, the floundering of an elephant in mud it had no way to avoid. But Katrina was also a giant itself, drowning a major city and knocking flat major regional infrastructure. It will take months to properly repair New Orleans' levees and seawalls and pump out the water and sludge, and to sweep away debris in the neighbouring states. That will be followed by years of rebuilding. We hardly assume that Mounties or others will be better able to act when Vancouver has its "big" earthquake at some point in the next several centuries. We know its coming, being overdue in a statistical sense, but who is every really prepared for an inevitable disaster they will likely not witness. Disasters are inherently not normal. They define what we take for granted, and what we shouldn't. The next weeks and months will be doing that for Americans and by extension for all of us. Energy Storm In our mid August Dispatch we had made the point that jumping crude prices then were counter intuitive against refinery shutdowns. Fewer refiners, regardless of the reason, should mean a lower crude oil price. Though many see refineries as simply and extension of the oil delivery process they are, in fact, the crude producer's largest customer base. They are the manufacturer/wholesaler in the supply chain. It appears Katrina has underscored this seemingly basic point for traders. Somewhat less than 1.5 million barrels of crude production and a similar level of natural gas output were knocked out by the storm. Oil rigs lost and damaged by the storm were secondary to refining and transport systems damaged to a similar degree. Gasoline and other derivative products are in short supply. The hasty retreat of crude's price after an initial surge indicated a concerned market, though one that was finally accepting that shut down refineries should ease, not worsen, the crude supply probl...

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