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Oil Industry Expert Vahan Janjigian: The Economic Impact of Katrina


CBN.com – PAT ROBERTSON: With us now to talk about the economic impact of Katrina is Vahan Janjigian. He follows the oil industry for the Forbes Investor Advisory Institute. Vahan, tell us your take on this thing right now.

VAHAN JANJIGIAN: Of course, the economic impact pales in comparison to the human toll. We'll see a big impact. What we will see is a significant reduction in GDP growth. We'll see corporate earnings coming in below expectations. Oil prices are certainly concerning, but the bigger concern is gasoline prices. We can deal with the crude problem because, as you pointed out, President Bush will release oil from the SPR (Strategic Petroleum Reserve) as he should. But the bigger problem is refining capacity, which was tight before the hurricane hit. We have eight refineries shut down. We'll see higher gasoline prices, perhaps the actual retail price could reach $3.10 to 3.20 per gallon.

ROBERTSON: The environmentalists went after the refinery. The environmentalists stopped the rebuilding of the refinery and the judge issued the restraining order. That has happened all over the country. We haven't had a new refinery since Jimmy Carter. What will we do about this? It takes years to build up the infrastructure.

JANJIGIAN: That is true. We don't just import crude oil, we import gasoline. Refining capacity all over the world is tight. We have to decide how to balance the environmental concerns with our economic needs.

ROBERTSON: I read that $70 a barrel is the tipping point for the economy. I noticed yesterday that natural gas - it was something like $13.20, which is unbelievable. How do we handle these numbers?

JANJIGIAN: We are going to have a tough time handling the numbers. As a result, we'll see higher heating oil prices and natural gas prices this winter season, and higher diesel prices, which means the cost of transporting goods is going to go up. Inflation is going up. I am not here to sound like a gloom and doomer. To a large extent, we'll see economic growth, but it is going to be less than expected. I am surprised how complacent investors seem to be. The stock market is up for theweek since the hurricane news came out. I am warning my readers that perhaps it is time to step aside and get out of the market right now.

ROBERTSON: Does that include oil issues or everything?

JANJIGIAN: I would right now decrease my allocations to equities across the board. My concern about the oil stocks are that they are rich and have gone up bit. They may go up higher in the short term. But it is time to step aside.

ROBERTSON: Is there any policy change that the government can make?

JANJIGIAN: Just last week, the government announced new regulations for the rules for light trucks. It requires higher mileage standards. I find it ironic. When gasoline prices are this high, we don't need the government to tell us we are driving more fuel-efficient cars. We are already starting to see a change in behavior. People are driving less and leaving the SUV in the driveway, and using smaller cars. People are voluntarily changing their behavior as prices go up.

ROBERTSON: How long do you think it will take for the industry to get back on its feet?

JANJIGIAN: Ivan damaged 150 structures in the Gulf and 10,000 miles of pipeline, and it took six months before operations came back to fairly normal levels. This is going to be much worse. We don't know the extent of the damages yet. I think it will be a good year before back to normal levels.

ROBERTSON: That is frightening. Vahan Janjigian, thank you.

Very frightening stuff.
An anylist yesterday predicted that gas prices would go over $4 a gallon within weeks.
This, combined with the TRIPLING of homeowner's property taxes, here where we live, will be enough to drive many to the poorhouse.
They could not have raised our taxes at a WORSE time.
Has anyone in power ever heard of CUTTING SPENDING a bit to help the load on the taxpayers? This has me furious.
And what about the cost of home heating this winter? I truly believe that we are almost on the verge of economic collapse because of some IDIOTS in high office. I don't blame the hurricane--that's a force of nature. But raising taxes at this time is cruel.

I remember a few years back, when oil companies were merging, and several refineries were shut down due to our overcapacity. Just a few more layoffs at the time. Now we have a shortage, and of course the environmentalists are to blame, and not the oil executives who shut the refineries down. Of course the oil companies profit more when there isn't enough capacity, and the environmentalists don't. When in doubt about who to blame, follow the old dictum from Watergate, "Follow the money."

when amerika wakes up to it's potential to heading bio fuels in the mass market then these problems would not happen. every town or city could fefine its own fuel from its area. shutting out dependence on fossil fuels , which are limited. why wait until the end of it before making a new beginning?

the extraction and dependence on fossil fuels has shown that it is dangerous. economically by making a few rich, creating wars, and pollution.
itbio fuels can be subsidized instead of the fossil fuel industry. the fossil fuel industry has made enough money to survive the shift to bio-fuels. the tech is there. it is known and has been known for some time.

Originally posted by rendova
Very frightening stuff.
An anylist yesterday predicted that gas prices would go over $4 a gallon within weeks.
This, combined with the TRIPLING of homeowner's property taxes, here where we live, will be enough to drive many to the poorhouse.
They could not have raised our taxes at a WORSE time.
Has anyone in power ever heard of CUTTING SPENDING a bit to help the load on the taxpayers? This has me furious.
And what about the cost of home heating this winter? I truly believe that we are almost on the verge of economic collapse because of some IDIOTS in high office. I don't blame the hurricane--that's a force of nature. But raising taxes at this time is cruel.

funny how gas jumps so much "because of hurricane" , and companies make hugh profits. THEN the government sends in fuel, and suspends all state taxes tonight at midnight.

during bush's reign, there has been one fumble after another.
the man is a bumbling idiot, or a wise con artist with an oil company hand up his ass.

funny how gas jumps so much "because of hurricane" , and companies make hugh profits. THEN the government sends in fuel, and suspends all state taxes tonight at midnight.
The price of gas(much like the value of our dollar) bases itself on fear. Refineries and oil rigs went down due to the huricane, and while that in and of itself is not necessarily enough to cause an actual gas shortage, the fear of that causes investors to start shitting their pants and using the money as toilet paper. That means there aren't enough bills otherwise and the gas prices went up in accordance with investor's bowel movements.

As a country, we can handle a serious gas shortage, even rationing. Hell, we could have serious cash shortage also and enter another great depresssion and survive. However, the only way we could possibly do any of this would be to suspend personal monetary gain for a time in order to yank ourselves back onto our feet. The rich can't stand by themselves when they're under a pile of the starving poor. The nation has hit one of the worst crises we've seen in the longest time and of course our overly "conservative" federal leadership will begin to worry about how much money we spend on helping people. For the past couple decades it seems the Federal government has failed at one of only things it needs to do, and it has cost us. I shall ask, who will end up cleaning this mess up? Our fathers, or their children?

there goes the grocery bill budget...gas affects everything. Gas is GOD.

DIE Suburbs DIE!!!

Apparently the figure for the average gas expenses for the average family in america for the next year will be close to $2,000 dollars.

Ouch!

With gas prices being as high as they are, I wonder if there will be a lot of smart cars on the road shortly?

Originally posted by 500lbguerilla
DIE Suburbs DIE!!!

Maybe if the liberals could figure out how to run the cities people wouldn't feel the need to flee.