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Katrina blows in higher gas prices
Mineral of the Month: Manganese


Katrina blows in higher gas prices

When Hurricane Katrina pummeled Gulf Coast communities in August, it left behind a daily reminder of the disaster nationwide: gasoline prices above $3 a gallon. In the weeks following the storm, gas prices rose, some stations ran dry, and other stations reported gas lines the likes of which have not been seen since the 1970s (see story, page 57). As residents of Louisiana and Mississippi struggle to rebound, so too does the oil and gas industry.

In the weeks following Hurricane Katrina, gas prices topped $3 a gallon, as seen at this station in northern Virginia. Photo by Megan Sever.


The Gulf of Mexico accounts for 35 percent of U.S. domestic oil production and 20 percent of U.S. natural gas production, according to the U.S. Energy Information Administration (EIA). Additionally, more than 10 percent of U.S. oil imports run through the Gulf Coast, which is also home to many refineries and pipeline networks. The area represents “a complex that constitutes our single most important energy asset,” wrote Daniel Yergin, chairman of Cambridge Energy Research Associates in The Wall Street Journal on Sept. 2, and the full scope of the energy disaster will not be understood for some time.

The high gas prices immediately following the storm were tied to Katrina’s impact on the refineries and pipelines on the Gulf Coast. The storm completely shut down 10 refineries and slowed services at six others across the region, as well as knocking out power to the pipelines that transport petroleum to the Midwest and East Coast. Although these pipelines were operating at full capacity within a week, refineries have not fared as well.

Ten percent of the nation’s refining capacity was lost in the storm. Some of the refining capacity came back quickly, but at press time, four refineries remained closed due to severe damage and flooding, says John Felmy, an economist with the American Petroleum Institute. “Considering the inspectors can’t even get in to assess the damages, it’s really indeterminate how long they’ll be down.”

The nation may also face several months before full production capacity can be reached at the offshore oil platforms and rigs that were damaged in the storm, Felmy says. According to the U.S. Minerals Management Service, close to 80 percent of the 819 manned oil platforms in the Gulf of Mexico were evacuated and shut down prior to the storm, and almost 70 percent of 134 active rigs were evacuated. A week after the storm, 228 platforms and 37 rigs remained empty, representing an average of 1 million barrels of oil a day of lost production.

At least 50 oil platforms or rigs were severely damaged or lost, Felmy says. Energy companies must inspect them both at the surface and below the water before they resume operations, he says, to ensure there was no damage. However, an even bigger question, Yergin wrote, is the status of the 53,000 kilometers of underwater pipelines in the Gulf, which are “very vulnerable” to mudslides, as energy companies learned last year following Hurricane Ivan, when undersea mudslides damaged pipelines and knocked platforms off their moorings. It will likely take some time for remotely operated underwater vehicles to assess damages to all of the lines.

Still, although the national average for gasoline prices rose from $2.29 a gallon to $3.06 from Aug. 1 to Sept. 5, according to EIA, shortages were minimal. Following Katrina, when refiners began running low on oil to turn into gasoline, the Bush administration opened the strategic petroleum reserve, loaning 9.1 million barrels of oil to refiners. To ease globally tight supplies, the International Energy Agency required an additional 2 million barrels of oil a day be released into the open market for all of September; half of that amount came from the U.S. reserve.

“There’s no question that opening the reserve played a very important role” in easing the gas prices and shortages immediately following the hurricane, Felmy says. Other changes the Bush administration suggested, he says, such as relaxing the rules about “summer” blends of gasoline to allow lower grades of gasoline to be sold, and allowing foreign oil tankers to transport oil from one U.S. port to another, also helped to ease the situation. Despite the relief, what gas prices will do is “impossible to say,” he says, especially as prices are so dependent on unpredictable consumer behavior.

The week following the hurricane, “we saw absurd rumors about the nation running out of gas or that gas stations would be closing, so consumers rushed out to fill their tanks,” whether they needed gas or not, Felmy says. “A rush of demand like that is enough to trigger gas shortages and drive prices sharply higher. Consumers can drain the system dry even when everything is working well, so we just have to hope that people are smart enough” to not add pressure to an already taut system.

Also, price controls and rations of gasoline — ideas that have been bantered about in many states and actually enacted in Hawaii — are “very bad ideas,” Felmy says. Such controls, he says, can cause an imbalance in supplies and lead to consumer panic.

Instead, Felmy says, government leaders need to promote conservation — from inflating tires properly and driving slower to carpooling or taking public transportation — to decrease the demand for petroleum. The government also needs to diversify the energy infrastructure, he says, by building new pipelines, increasing refining capacity and drilling for more oil.

Megan Sever

Related Story:
"October 17, 1973: OPEC Oil Embargo," Geotimes Benchmarks, October 2005 print exclusive


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Mineral of the Month: Manganese

Lisa Corathers, the Manganese Commodity Specialist for the U.S. Geological Survey, has compiled the following information about manganese, an extremely versatile mineral with many applications in the manufacturing of iron, steel, aluminum alloys, batteries and chemicals.

Manganese is one of the most important ferrous metals and one of the few for which the United States is totally dependent on imports. It is a black, brittle element predominantly used in metallurgical applications as an alloying addition, particularly in steel and cast iron production, which together provide the largest market for manganese (about 83 percent). It is also used as an alloy with nonferrous metals such as aluminum and copper. Nonmetallurgical applications of manganese include battery cathodes, soft ferrite magnets used in electronics, micronutrients found in fertilizers and animal feed, water treatment chemicals, and a colorant for bricks and ceramics.

Manganese is the 12th most abundant element in Earth’s crust, at about 0.1 percent; however, it is not found free in nature. Deposits occur on all land areas, deep ocean floors, other marine locations and on lake bottoms. Economically significant manganese deposits are of two general types — marine chemical sediments and secondary enrichment deposits.

Estimated world manganese ore reserves total 380 million metric tons, and leading producers are South Africa, Australia, Gabon, Brazil, Ukraine and China. For manganese ores to be commercially produced, the ore must contain 35 percent manganese or more, but the United States does not possess such reserves. As a result, manganese ore is not mined in the United States, except for recovery of ultra low-grade manganese schists that are used for coloring bricks and are mined at the Grover and Martin mines in South Carolina.

Manganese ferroalloy production waxed and waned in the United States during the 1900s. During the last quarter of the 20th century, manganese ferroalloy production and the number of producers decreased because of global competition. Production continued only at Eramet’s plant in Marietta, Ohio, at the turn of the 21st century. Since 2002, two other companies have produced silicomanganese sporadically — Highlanders Alloys LLC in New Haven, W.Va., and Globe Metallurgical Inc., in Beverly, Ohio — although neither is currently producing. In a similar fashion, manganese metal production in the United States diminished in the mid-1980s, with production ceasing altogether by mid-2001.

Because it is essential to steel production, a continued supply of manganese materials is vital to any defense effort as well as to maintenance and growth of an industrial economy. Concerns about the manganese supply led the U.S. federal government to establish a considerable manganese stockpile following World War II. In 1965, the federal government began selling stockpiled manganese materials determined to be in excess. The manganese content of manganese inventories being held by the federal government at year-end 2003 was estimated to be more than 1.03 million metric tons. Even with shipments from the government stockpile and domestic production of some manganese materials, the United States has been reliant upon imports for 100 percent of its manganese needs since 1985.

In 2003, the apparent consumption of manganese in the United States was roughly 692,000 tons. The leading sources of manganese imports in 2000 through 2003 were South Africa (36 percent), Gabon (21 percent), Australia (12 percent) and France (7 percent). World consumption of manganese ore in 2003 approached 23 million tons (gross weight), approximately the same level as world production.

Visit minerals.usgs.gov/minerals for more information on manganese and other mineral resources.

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