Wednesday, July 23, 2008

A brief thought about oil....

There was an oil spill in the Mississippi River today; the Coast Guard closed about 30 miles of the river to navigation, basically shutting down shipping. Rather ironically, it forced the cancellation of a McCain campaign appearance on a Louisiana oil rig, intended to show his support for expanded coastal oil drilling.

Now here's what I'm wondering... with all the fuss abotu oil prices lately, how would it change things if the media started reporting spills in terms of the cost of the oil, rather than the quantity? Yes, I know, values change but quantities don't, but I thought it would be a good moment for Aufklarung.

So here's the math....

Bloomberg had the price of crude oil at $124.80 per barrel this afternoon, down from the record high of $147 per barrel two weeks ago.

Multiply that by the approximately 400,000 barrels released in the spill.

That's almost fifty million dollars worth of oil-- $49,920,000.00, to be picky.

Some of the oil will be recoverable, but most will not. I'm not even going to try to calculate the cost of the spill cleanup, ecological damage, lost business due to shipping delays, etc. Ploonk. You're $50 million in the hole right there.

Just FWIW-- if it had been ethanol that was spilled, it probably wouldn't have been any better. Ethanol is cheaper, but not free (and highly soluble, so it'll dissolve and be almost impossible to recover) whereas many constituents of crude oil float rather than dissolve or sink).

Ethanol has about 65% the oomph-per-volume of gasoline, but costs about 75% as much to produce (less oomph per dollar), so all up you're actually going to consume more ethanol to get the same oomph in your gas tank.

EDIT-- ok, time for a slight correction. The source I used for the above bit said it was 400,000 barrels of crude. I have since found out that it was in fact 400,000 gallons (9,983 barrels) of No. 6 fuel oil. 9,983 x the $50.75/barrel price that seems to be the going rate around here = $506,637.20 Ok, so there's a big difference between $50 million and a half million.... but the point, I think still stands;)

Oh, and No. 6 oil is sludge, tarry stuff that tends to sink.

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