Editorial comment

	Vol. 229 No.10
PERRY A. FISCHER, EDITOR

Yikes! Ike, prices, politics and other nonsense

I’m not sure whether Houston is the oil capital of the world-if not, then it’s close. But Hurricane Ike touched the lives of all who live here, and many oilfield operations far away as well. The death toll is unsettled, but including the Caribbean, it could get to 900; more than 50 deaths occurred in the US, and that number could easily go higher given that there are dozens of people missing from the barrier islands of Galveston and the Bolivar Peninsula. Our thoughts and prayers go out to those folks who suffered great loss. Everyone was affected, even agricultural crops, and some 4,000 cows were killed.

Ike was a weird hurricane. Forecasters will be trying to learn what happened for years. Why was the storm surge so strong well ahead of the storm? Why was the eye of storm so continuously disorganized? Why was the central pressure of 944 millibars so way out of line with only 105-mph winds, and for so long? No one could really tell what size the ever-changing eye was, nor whether the storm would strengthen or weaken.

One forecaster, some 48 hours before the storm hit, commented, “It’s hard enough to predict the path and strength of a hurricane, but we don’t know how to predict its structure.” Fortunately, most of the storm went east of Houston; so Houston, Galveston and Galveston Bay were hit a little less hard than would otherwise have been the case. But the Bolivar Peninsula, which lies east of the center, was demolished.

Another oddity was the unusual strength of the southern part of the storm, which is usually weaker. What little damage occurred in Houston came from 50-mph winds (and stronger gusts) out of the west. And while the storm marched through at 12 mph, its huge size meant that the Houston area had to endure tropical-storm force winds for about 10 hours. Power outages were the result and the main problem. Well over two million people lost power for days. I went 12 days without power or water. Some folks have been without electricity for two weeks. As I write this, some 400,000 people still do not have power.

Because of Ike, I’ve learned things that I never expected to. I’ve learned that after a hurricane, women-and some men-suddenly find me very attractive holding my 24-inch chainsaw. I’ve learned that for some reason, the aggravation of the noise from your neighbor’s generator is twice as bad when you don’t have one. I now know three television meteorologists on a first-name basis. I’ve Googled the etymology of the word “hunker,” and now know why you cannot “hunker up.”

Our industry is pledging millions to the relief effort. BP will donate $8 million, Reliant Energy of Houston is donating $1 million, GDF Suez Energy North America is contributing $500,000, Shell Oil and Motiva Enterprises are donating $1 million; Hess donated $3 million; Chevron contributed $3 million; Marathon gave $1.5 million; ExxonMobil donated $5 million (in addition to 1.5 million for Hurricane Gustav), while ConocoPhillips will contribute $5 million. There are others, too numerous to name. Most companies are matching employee contributions as well. The monies are being funneled through organizations like the American Red Cross, United Way, Salvation Army, Texas Disaster Relief Fund and the Gulf Coast Ike Relief Fund.

Prices; the Great Deregulation Movement-until last Thursday. A couple of months ago I predicted capitulation in the markets. I was intentionally vague whether I meant commodities or stocks, because I really see them as related. We just witnessed the oddest market movements in the last 30 years-they are historic. We recently went a week where the smallest point swing on the Dow was 400−500 points.

We now know that $140 oil is not sustainable. Its precipitous fall to $90 in just eight weeks was dramatic. (It’s nice to know folks read my column!?) Even a Russian war near a million-barrel-a-day oil pipeline, with reports of attempts to blow it up, and an extended shutdown, had no effect. Two hurricanes plow through the center of the Gulf of Mexico, taking 1.2 million barrels a day off the market, and oil markets yawn. Then, a next-month-future’s expiration date occurs, as they do every month, and pundits claim it as the reason that oil jumped a historic $25.45 in one (intra) day, 30% in a week. It’s all about the fundamentals. Yeah, right.

I’m not sure which is weirder, seeing Republicans clamor for re-regulation, or watching them agree with Democrats that the US needs to “privatize the gains, but socialize the losses.” By the time you read this, I suspect that some sort of agreement will have been made for a taxpayer bailout of the big Wall Street firms that mismanaged their money. It’s down to it: the full faith and credit of the United States. No one really knows whether this will stop the dominos from falling, or whether the US can continue to borrow its way out of debt.

The letter below says it all.

Dear Trusted Friend,

I need to ask your support in urgent secret business involving transfer of funds of great magnitude. I am Ministry of the Treasury of a Great Republic. My country has had crisis that has caused the need for large transfer of funds of 700 billion dollars US. But evil government officials have so far prevented me from receiving these funds. If you would assist me in this transfer, it would be most profitable to you. I am working with Mr. Phil Gramm, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a senator, you may know him as leader of the American banking deregulation movement in the 1990s. So you know that this transaction is 100% safe.

This is matter of great urgency. We need the funds as quickly as possible. Because we are constantly under surveillance, my family lawyer advised me to look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred. Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to: bailout@treasury.gov.ng so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards to protect the funds.

Your Faithfully Minister of Treasury
The Honorable Henry Paulson