They say bad news comes in threes, and at least this week, that’s the case for oil production. Bloomberg is reporting that British Petroleum is shutting down it’s main oil field in Prudhoe Bay, Alaska, taking approximately eight percent of US oil production offline.
The official reason being given is corrosion in a pipeline, and I have no reason to doubt it. There was no timeline given for when the field would come back online, and oil prices have already started reacting accordingly. If we get a strong hurricane in the gulf this year, we’ll easily cross the $4/gallon barrier before fall. We may get there regardless, and regard $3 gasoline as impossibly cheap by this time next year…
Once again, we don’t need permanent drops in production to have a massive effect on the economy. I’m assuming the Prudhoe Bay field will start producing again sometime in the future. I’m also assuming that it won’t have a significant effect on the price of gasoline (and by extension, many other products), since we’ve now established that we’ll pay at least $3 per gallon without complaining too much.
Whether this slow ratcheting up of gas prices is intentional (i.e. using the market to alter perspectives), or just fallout from the true economics of modern-day oil production, I don’t know. Considering the information leaking out of the US government over the last few years, it could be either, or both. I’m betting on both.