Author: Jerome a Paris

Dutch group to fly in temporary mass mortuary

US authorities have contracted De Boer, a Dutch company that is the world’s biggest supplier of temporary accommodation, to fly in a temporary mass mortuary to the New Orleans area. (…)

The temporary morgue is capable of holding 10,000 bodies but the US Federal Emergency Management Agency has told De Boer to be ready to increase its capacity to accommodate more fatalities, according to Koos Tesselaar, the company chairman.

“We have been talking to the US authorities daily. It started with [an order for] a much smaller facility, two days after the event, for 500 bodies, and it was scaled up to 10,000 now,” Mr Tesselaar said. “My feeling is that there might be more needed soon. That is the impression I get from the discussions we have had. They have indicated that we should be prepared to offer more.”

And like I posted in a diary yesterday, some areas have been completely abandoned until now. The full scale of the destruction has yet to sink in.

One year ago today, my then-4-year-old son went to hospital for a very delicate surgery on his brain, where a tumor had been detected just a few days earlier. We waited anxiously for the results of that procedure, which ended up lasting 8 hours, not knowing in what state we’d find our son (dead or paralysed were possible).

I hardly have any memory of that day. I know that we went to the top of the Eiffel Tower with our boy in the early morning (he was still almost normal, just walking with a strange twist – the symptom that had led us to the doctors and finally to that fateful diagnosis), brought him to the room where he was prepped up and left him there. We may have gone to the movies or to some other attempt at distracting ourselves, I simply don’t remember. It was unreal to us then, and it still is today. We had just been struck by lighting, a senseless, totally random life-threatening condition and didn’t know what to do beyond wondering if we could have seen it before and (each on our own, as the idea could not be voiced) whether our beloved boy would die.

Finally, we were asked to come to his room. His head was fully bandaged, and he was hooked to at least a dozen pieces of blinking equipment monitoring him or drip-feeding him. But he was alive, and sort of responded to the sound of our voice. His whole right side seemed paralysed. The surgeons appeared to be reasonably happy with their work, but would now need to analyse what they had taken out (to know whether it was malign or benign – it is impossible to determine otherwise) and decide on what would be next – nothing, chemiotherapy or radiotherapy, or a combination. They said that they could not take it all out – due to the terrible location of the tumor, the surgery itself could actually be more dangerous than the tumor. We left him for the night to come out of anesthesia and came back the next day. He was already able to respond to us, but still no movement on his right side. He gained strength rapidly in the next two days, and amazingly, was able to come out of his room and walk -well, hop on one leg – in the sun barely three days after the surgery. It would be the first of many amazing acts of courage from him. We took him home the next day. I still cannot believe (and the doctors seemed to think the same) that he was home barely 4 days after a 8-hour procedure on his brain.

Thankfully, everybody around us was great. Friends in the neighborood took our two daughters (aged 5 years and 18 months) with them as much as necessary, my parents came over to stay with us for a while, and my bosses let me take as many days off as needed. And of course, we thankfully did not have to worry about the money stuff, as such conditions are 100% covered by the State. Still, the days as we waited for further information on what came next were not pleasant. Guilt, countless “what ifs”, fear for the future, and numb anxiety clouded our minds and left us in a daze, even as our son was slowly beginning to stand on his legs and haltingly walk. But little movement from his right arm.

After two or three weeks like this, the doctors came back with the news that the tumor was only slightly malign and that chemio was required. A severe reeducation regimen was also required for his arm and leg. Thus we entered into a new rythm for our lifes, with daily trips to the specialised hospital for his reeducation, twice monthly trips to the cancer center for the chemio, and a newly dependent little boy, suddenly unable to dress on his own, to walk without a clunky cast, and with a severely weakened (by the chemio) immune system. My wife gave up her job to take care of our son full time (we received a stipend for her from the State), and we slowly tried to focus again as much as possible on out two daughters, the very quiet and uncomplaining (and brave) older one, and the distraught toddler who did not understand why she had lost all the attention of her parents (at the nursery where she goes during the day, they told us afterwards that they found her incredibly sad throughout these days, and I must say that we simply did not notice at that time). My son was able to go to his preschool once or twice a week for a couple hours, and he was given a hero’s welcome by his class (they spontaneously stood up and clapped him the first time he came back, it was quite a sight. both his siters were great with him as well, surrounding him with love and activity.

His leg made great progress, his arm much less. We first had thought that it would take a few weeks for him to get back to normal; then we were told that we would know after a year; now that a year has passed, he is still handicapped, but we are told that he can still make progress in the coming year and that he has actually exceeded the expectations of all doctors on that front with his progress. He cannot move his thumb, so has trouble holding anything, but he is now able to ride a bike – he simply needs to use his good hand to position his right hand properly on the handle.

We now discover the extent of his handicap, and how that was only slowly revealed to us. Conversely, the doctors were a lot more conservative on the actual fate of the tumor. At first they would not commit themselves on survival expectations and were evasive on the gravity of the tumor. Now that the chemio seems to be successful, I think that they were reasonably confident of it all along (although they were pleasantly surprised by how quickly the tumor receded followign the treatment) but did not want to inflate our hopes. When you hear “brain tumor”, you immediately think the worst, so they had no need to scare us, and they let us absorb the good news slowly; on the handicap side, more of a long term problem, the awareness followed the opposite route. I don’t know if that was a conscious decision on their part, but if it was, I suspect that it was wise.

He has made such unexpected progress that, who knows, he’ll make a lot more. He has been incredibly brave, especially during the past few months, where the weakness of his immune system from the relentless attack of the chemio has required that he be hospitalised a number of times for transfusions and antibiotic injections to protect him against infection. My wife has also been incredibly strong, taking him to see all the doctors, staying with him at the hospital most of the time, carrying the guilt that somehow, in some way, this could have been prevented, or anticipated, or treated early (thankfully, our doctors have told us that there is no known cause, that it was detected early, and that it changed little as the really nasty part was the location of the tumor and not its size), and somehow keeping up with the rest of our daily life.

We are know entering this second year of our new life with an almost normal rythm – reeducation will be done at home, and there are only a few more chemio doese to do, so he is going to school almost normally, and my wife will not need to take him around so much. He is pretty much back to his natural self, a very dynamic, curious, adventurous little boy. At times he is bald, and there are some physical activities or gestures that he cannot do, but otherwise you’d hardly notice that he had a brush with death and that he may need help for the rest of his life for some things. We are living with the consciousness of his – and our own – vulnerability, and also with an acute awareness of how the solidarity of all around us has helped and will keep on being needed in the future – the institutional solidarity of our compatriots via the healthcare system and the educational system that treated him and welcomed him and supported us, and the more immediate solidarity of friends and family to help us with basic things like spur-of-the-moment childcare, the simple but invaluable support of a friendly presence for us and our kids, and simply being able to enjoy ourselves normally as much as possible.

I intended to write this story today in any case, simply to tell the story and get the feedback from you guys that I have grown to appreciate and crave in recent months, and which has helped me go through this period with most of my sanity, but I think it takes an additional dimension in the context of today’s tragedy in the south of the USA. We have seen amazing displays of solidarity, kindness and generosity from untold numbers of people, and we have seen the lack of institutional solidarity in the failure of the government to save or to care for the people of New Orleans. We all feel, correctly, that while individual solidarity is a great thing, it cannot be enough in such circumstances. Some of us are weaker, or unlucky, and we need to help them. We need institutions to help them. We need organised institutions to help them. It is not your fault when disease strikes, or when a catastrophe strikes, and it is not only up to the closest friends or family or the random kindness of unknown strangers to step up to the plate, it is up to all of us, and this is what governments are for – to organise solidarity and to provide safety and help to those that need it, without questions, without conditions, and without reticence.

I was lucky to have such institutional solidarity be provided to my son and my family. The families of New Orleans have obviously not benefitted form the same, and that comes, for a large part, from the destructive ideology of the right for the past 30 years, that abhors solidarity and claims that individualism should triumph (without of course having even the consistency to say that personal responsibility and virtue should govern our acts). That ideology has made “government” and “the common good” dirty words, and states that victims deserve what they get. They are not, and they don’t. We must denounce its utter cynicism and failure; its corrosive nature for our social fabric, and its total moral bankruptcy. That ideology is gaining ground in Europe as well, and we must fight it together, for my son, for the homeless of Louisiana and Mississippi, and for the future victims of disease or catastrophe – for all of us.  

Government can and must protect us from the random miseries of life.

In case you missed it, there is a great article in today’s Los Angeles Times, by Robert Scheer (the title says it all):

WHAT THE WORLD has witnessed this past week is an image of poverty and social disarray that tears away the affluent mask of the United States.

Instead of the much-celebrated American can-do machine that promises to bring freedom and prosperity to less fortunate people abroad, we have seen a callous official incompetence that puts even Third World rulers to shame.

(…)

For half a century, free-market purists have to great effect denigrated the essential role that modern government performs as some terrible liberal plot. Thus, the symbolism of New Orleans’ flooding is tragically apt: Franklin Roosevelt’s New Deal and Louisiana Gov. Huey Long’s ambitious populist reforms in the 1930s eased Louisiana out of feudalism and toward modernity; the Reagan Revolution and the callousness of both Bush administrations have sent them back toward the abyss.

(…)

It is the result of a campaign by most Republicans and too many Democrats to systematically vilify the role of government in American life. Manipulative politicians have convinced lower- and middle-class whites that their own economic pains were caused by “quasi-socialist” government policies that aid only poor brown and black people — even as corporate profits and CEO salaries soared.

For decades we have seen social services that benefit everyone — education, community policing, public health, environmental protections and infrastructure repair, emergency services — in steady, steep decline in the face of tax cuts and rising military spending. But it is a false savings.

(…)

Watching on television the stark vulnerability of a permanent underclass of African Americans living in New Orleans ghettos is terrifying. It should be remembered, however, that even when hurricanes are not threatening their lives and sanity, they live in rotting housing complexes, attend embarrassingly ill-equipped public schools and, lacking adequate police protection, are frequently terrorized by unemployed, uneducated young men.

In fact, rather than an anomaly, the public suffering of these desperate Americans [a permanent underclass of African Americans living in New Orleans ghettos] is a symbol for a nation that is becoming progressively poorer under the leadership of the party of Big Business.

(…)

For those who have trouble with statistics, here’s the shorthand: The rich have been getting richer and the poor have been getting, in the ripe populist language of Louisiana’s legendary Long, the shaft.

(…)

No, these folks are supposed to be cruising on the rising tide of a booming, unregulated economy that “floats all boats.”

They were left floating all right.

Read it all. and again.

I’d like to provide a review of the commentary provided by the main business papers in English on Katrina and the reaction of the Bush administration. I include articles from the Financial Times, the Economist and the WSJ

This is crossposted from the European Tribune, to remind you to visit us over there, and to DailyKos for your kind recommendations, so as to bring traffic over here!

• the FT (London), after publishing a shameful defense of Bush’s competence last week (critiqued here), has since provided some scathing criticism over the week-end (reviewed here) and has more today (reviewed below);

• the Economist (also from London, but more than half their readers are in the US) has been mysteriously kind to Bush over the past 5 years, and they continue to be so now. Despite calling to vote for Kerry, they have provided excuses for Bush throughout, and keep at it now. There coverage of the economic and financial impact, and even of the political fallout, is nevertheless interesting;

• the Wall Street Journal, or at least its opinion pages, has been consistent in its support of Bush and his policies, and continues on that line. Today’s message to help in the aftermath of Katrina: cut taxes! Deregulate oil drilling!

Let’s start with the WSJ, from their main editorial: Bush and Katrina

They are realistic enough to acknowledge that Bush fucked up last week:

 the aftermath of Katrina poses a threat to his entire second term.

(…)

Mr. Bush is going to have to recognize the obvious initial failure of the Department of Homeland Security in its first big post-9/11 test.

(…)

If FEMA can’t now handle the diaspora out of New Orleans to Houston, Baton Rouge and other cities, the political retribution will be fierce.

But their conclusions are not what you might think…

• first, promote Rumsfeld, as the Pentagon was the only branch of government that showed some competence in recent days;

• second, don’t spend any money on a city located in a dangerous place, but offer tax-breaks to those that do want to rebuild (“There’s a danger here of tax breaks for floating casinos, but the greater risk is spending $20 billion or more solely on the priorities of local politicians.”)

• third, to respond to the higher oil prices and the risks for the US economy, relax restrictions on drilling, and lower taxes again. (“Republicans have been far too defensive on tax cuts, and Katrina is an opening to explain their necessity and to push for making them permanent.”

In a word – Bush is on the defensive, he should go back on the offensive.Maybe it’s heartless and odious to us, but it is not irrational, and it shows what needs to be done on the Democrats’ side: keep Bush on the defensive, and he loses.

The Economist, in addition to the spectacular picture above, provides some insightful commentary on the economic and energy impact of the crisis. They flag the loss of oil and gas production, the damage to the refineries and some pipelines, and note the positive reaction of the markets to the opening up of the SPR and to the help provided by Europeans on the gasoline front. They also note that damage to production could be more extensive than thought:

Less visible to the naked eye, but more important for energy supplies, is a latticework of underwater pipelines that brings these hydrocarbons to shore (see map). In 2004, Hurricane Ivan precipitated underwater mudslides that damaged several of these pipelines, disrupting supplies. At the worst point, one-third of the oil and a fifth of the gas produced in the Gulf was knocked out.

But in their article on the political aftermath (The blame game, they peddle a line very close to that of the Bush administration: “it’s the locals’ fault”. After mentioning that some are criticising the administration (but without giving any details), they write this:

Many of the immediate difficulties are understandable. As Michael Chertoff, the secretary of homeland security, pointed out, the disaster has in fact been a double one.

(…)

Even if some failures can be attributed to the Bush administration, the most important reasons for Katrina’s deadliness may lie in decisions that predate the current president, from Jean Baptiste le Moyne de Bienville’s decision to found the city in its precarious location, in 1718, to the more recent “improvements” in the area’s maritime navigability that have damaged south-eastern Louisiana’s wetlands.

(…)

It is an uncomfortable fact that millions of Americans have made the decision to live in areas prone to this kind of disaster. Though Congress has authorised an immediate $10.5 billion relief package, Denny Hastert, the speaker of the House of Representatives, has expressed doubt that large dollops of money should be spent on reconstruction in a location as exposed as New Orleans (though he later backpedalled). But there remain important questions to be asked at both the local and national level about the failures that led to Katrina’s destruction and chaos

As the Economist is pretty influntial, expect this to be the “official line” for the global business world.

Thankfully, the Financial Times (apart from the one article mentioned above) has been much more critical. In addition to several LTEs criticising harshly that article, it publishes the following column by Michael Lind (a well-known Washington commentator):

Tragic costs of Bush’s Iraq obsession

In early 2001, shortly after President George W. Bush was inaugurated and before 9/11, the Federal Emergency Management Agency warned of the three most devastating disasters that could strike the US: a terrorist attack on New York City, a hurricane flooding New Orleans and a San Francisco earthquake. The Bush administration was focused on its priority: Iraq.

(…) [New York is struck. Bush focuses on Iraq]

Day after day, the levees of Lake Pontchartrain in New Orleans and the wetlands that protected the city were eroding. Mr Bush and his allies in the Republican-majority Congress have slashed federal spending for flood control in south-east Louisiana by half and funds for work at Lake Pontchartrain by almost two-thirds. (…) When Katrina struck, tens of thousands of National Guard soldiers were in Iraq, along with much of the equipment needed for disaster relief.

(…)[He also focuses on the “porous” US-Mexico border and the security risk it represents]

If, early in 2001, the Bush administration had focused on al-Qaeda instead of Iraq, it might have responded to FEMA’s call to prepare New York for a big terrorist incident. If it had not divided US forces to fight two wars at once, Afghanistan might have been pacified while Saddam remained in power but contained. If Bush had not sacrificed border security to pay for the war in Iraq, the Mexican border might be under control. If Bush had not diverted so many National Guard units to Iraq, disaster relief following Hurricane Katrina would have been swifter and more effective. And if the war in Iraq had not caused the Bush administration to raid money for the New ­Orleans levees, this big port city might not be a corpse-filled cesspool.

Supporters of the war in Iraq predicted that the dominos would fall in the Middle East. Instead, the dominos are falling across America.

That last line may be prophetic, especially in view of the slow-fuse time bomb nature of the energy crisis (which the Financial Times has also covered in much more detail than the other two publications above).

This admittedly only covers the English language business press, but we all know that it sets the language for all to follow. It seems that the European business class will have a less biased coverage than the American one, with a more varied vision of what has happened. We’ll see how it unfolds.

This diary is meant as an overview of the situation on the energy front. This is obviously not the most urgent issue right now, but it will have a significant impact on all of us in the near future and is worth, I think, a few minutes of your attention.

• oil and gas
• refining and gasoline

Warning – about 400kb of picture below. You can click on all pictures for bigger versions.

Yesterday’s survey can be found here
Oil and (natural) gas

Not much change on the oil production side. Using the daily updates provided by the (federal) Minerals Management Service:

Today’s shut-in oil production is 1,356,498 BOPD. This shut-in oil production is equivalent to 90.43% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 7.866 BCFPD. This shut-in gas production is equivalent to 78.66% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The numbers yesterday were respectively 91.4% and 83.4%, so progress is almost inexistant for the time being. That means that close to 1.5 mb/d, equivalent to 1.5% of world production and 8% of US consumption, are out, and seem likely to be for a while.

The missing natural gas production (8 bcfd) is close to 20% of US consumption and is even more worrying, as the huge jump in natgas prices shows:

As I wrote yesterday, this will have a very nasty long term effect on electricity prices (probably 50-100% increases) for everybody in the US.

refining and gasoline

On the oil front, the most worrying part is not oil per se, but the downstream sector, i.e. refining and retail sales. A number of diaries have come out with tales of increasing gasoline prices, and they reflect something simple: prices are up and stocks are down:

But let me explain in more detail what’s going on. The immediate reason is that:

A number of refineries have seen their production stop either because they have been flooded (as the New Orleans ConocoPhillips one in the picture above), because their supplies have been cut off (mostly due to power failures for the pipelines) and/or because their employees are not around (whether due to the evacuation or to lack of access).

The inserts in the picture above show this in grim detail:

You can also find more details from the (again, federal) Office of Energy Assurance: September 1, 4pm update (5 page pdf).

The result is that a big chunk of US gasoline production is down brutally:

About 1.8 mb/d or more than 10% of the nation’s capacity – and daily consumption – is down, and prognoses for their return to normal appear increasingly unlikely, especially in view of the localisation of these refineries (see map above) and the lack of roads (from the NYT):

In addition, a number of vital pipelines are still functioning at limited capacity (from the EA report above):

• Colonial Pipeline is now operating at 40% of normal operating capacity. Once additional generators are activated at inactive pump stations, production will increase to 1.2 to 1.3 million barrels per day. Both gasoline and distillates are currently being transported and delivered. The line was full when it went down, so deliveries were possible within hours – not days – of restart. The company anticipates that it may be able to achieve approximately 74% of normal operating capacity by Sunday and 75% to 86% by early or mid-next week if additional electricity can be supplied to critical pump stations. Further increases cannot be made until normal power is restored. The capacity of Colonial is about 2.4 million barrels per day. Solutions for power restoration are being actively pursued.

• Plantation has partially started its system as is operating at 25% of capacity and hopes to be up to 50% of normal operations by Friday.

• Capline, a crude oil pipeline serving the Midwest, was restarted yesterday at a rate of 720,000 barrels a day and can operate at reduced rates until the LOOP is fully operational.

• The Seaway Interstate Pipeline to Cushing, OK, is operating at full capacity (350,000 barrels a day). From Cushing, the Enbridge (Ozark) pipeline to Wood River and the BP pipeline to Chicago are operating at full capacity.

Colonial and Plantation bring oil to the whole eastern region of the USA, all the way to New England, which means that a large fraction of the US population is directly affected. And it is a big deal:

US pays the price of years of living dangerously

For years, industry observers have warned that the US oil refining system has been forced to run ever closer to full capacity to meet rising demand. Yet there has been not a single new refinery built for more than a quarter of a century.

Until now, says John Thieroff of Standard & Poor’s rating agency, the US has had the luxury of not having to address the problem. “They could have it both ways: don’t build any new refineries because no one wants to live next to them, while also having enough spare capacity – and unfettered access to ample imports – to maintain the status quo,” he said.

Hurricane Katrina ended that, sweeping through America’s energy heartland this week, shutting down nine refineries and leaving another three unable to run at full capacity.

Overnight, 12 per cent of US refining capacity disappeared. And, because of ever tighter environmental regulations, not all of that lost capacity can simply be replaced indefinitely with imports.

“The refining market is at its limit, and the storm kicked it over the limit,” says Robin West, chairman at PFC Energy, the industry consultancy.

Lack of investment due to poor profitability in the past 20 years, difficulty to fight nimbyism, and producers more recently enjoying the margins provided by the newly tight market have combined to let the system have no spare cpacity and no ability to tolerate small shock, let alon big ones.

As the USA do not have gasoline stocks, only oil stocks, the only place to get help is from Old Europe, which has most of the available gasoline stocks. Europe has offered to provide reserves as required by the US, but the Bush administration may be reluctant to pay the political, symbolic and diplomatic price from acceptign such help:

Europe’s offer of petrol places Bush in quandary

As news of massive, long-term damage at its refineries emerges, Washington appears to be in an unenviable position.

Long criticised for having no energy policy and an insatiable demand for gas guzzlers fuelled by cheap petrol, the US must now decide whether to accept help from Europe.

In so doing, US President George W. Bush would implicitly acknowledge some of his critics’ accusations and open himself up to demands for political and economic favours in return.

(…)

So far, the US has lost 5m barrels of petrol production because of the refinery damage caused by Katrina. Based on information from the US government yesterday, some analysts say that could swell to 52m, which would probably be enough to trigger an emergency plan by the IEA, they say.

The plan would involve not only putting tens of millions of barrels of petrol – and perhaps also jet fuel – into the market but would also allow countries to curb demand through reducing speed limits by up to 25 per cent, mandating car-pooling or compressing the working week for civil servants.

The IEA is not the only group willing to help. Venezuela, a member of the Organisation of Petroleum Exporting Countries but not a member of the IEA, has offered to send petrol to the US. It has strategically well-placed storage tanks on Curaçao island, which houses the hemisphere’s biggest refinery, and Borco in the Bahamas.

Whether Mr Bush would be pleased to accept aid from one of his most vocal opponents is less certain.

There are other hurdles for petrol coming to the US as well. Pipelines have been ruined by the storm and port facilities are also badly damaged. The US yesterday reduced its environmental restrictions on petrol. But traders say there are other laws that still prohibit certain types of petrol from being imported. This problem would be solved if the IEA called an emergency, agency officials said.

Will reality override pigheadedness within the Bush administration? If the current disruption in production, both for oil and for refining continue, there will soon be a very real major crisis for US drivers and thus also for the US economy.

The urgency is to help the people stuck in New Orleans to survive, but the survival of the US economy should be the next priority.

While it is much more important today to focus on the plight of the affected populations – to evacuate those that still need it, and to help those that have lost everything, it is also becoming clearer eache day that the impact of Katrina on the economy of the USA will be major, and that its international impact will also be very real.

Below the fold:

• oil
• refining capacity and gasoline
• electricity supply
• natural gas and power prices
• ports
• wheat
• other economic indicators
• some unexpected geopolitical ramifications

Oil

From the (federal) Mineral Management Service (press release for Wednesday)

Today’s shut-in oil production is 1,371,814 BOPD. This shut-in oil production is equivalent to 91.45% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 8.345 BCFPD. This shut-in gas production is equivalent to 83.46% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

This thread over at the oil drum (report from an anonymous insider ) which has been featured in earlier diaries provides some scary information on the status of the offshore platforms has now been partly confirmed by the Coast Guard which confirms that at least 20 platforms are missing (out of more than 700).

The big worry is that a lot of the underwater and onshore pipelines and facilities have been damaged.

It is likely that several hundred thoudand barrels per day will be missing for a long time. In the current streched world market, this is a significant volume gone missing at the worst time (fourth quarter in traditionally the period with the highest worldwide demand for oil).

Refining capacity
From the Dept. of  Energy‘s most recent update on the situation (5 page pdf): (click on picture for bigger version)

So at least 1.8 mb/d of capacity is currently closed, and close to 3 mb/d are under “reduced runs”, so not operating at full capacity, either due to power outages, lack of access to oil from pipeline closures or other causes. Hopefully this will come back on stream fairly quickly.

The FT reports that some of the producers have already started to ration fuel:

Refiners ration oil as they assess damage

The loss of contact with personnel underlined the depth of problems facing the nine US refineries shut down in the wake of the storm that on Monday swept through America’s energy heartland, shutting down 10 per cent of US refining capacity.

Valero said one of its refineries would be down for up to two weeks. Others were unclear how long it would take to restart operations that had been flooded with several feet of water, damaged in places and lost electricity. As a result, rationing by some refiners has already begun. Chevron, the second biggest oil and gas company in the US, was the first to reveal it was rationing petrol to buyers across the south-east of the country.

The pipelines that fed those areas were closed, said Michael Barrett, Chevron spokesman. “There is no way to get product up there.” The loss of power to two big pipelines that moved products out of the area had shut them down.

Mr Barrett explained that stations that had monthly contracts with Chevron could still get petrol, but they could only take a 1/30 of their allotment per day.

Some of this may be panic or bubble-like behavior:

US refinery industry caught out by hurricane disruption

The rise in oil prices to $70 a barrel after Hurricane Katrina swept through the Gulf of Mexico has highlighted the fact that the US refinery industry is unable to handle short-term supply disruptions.

The hurricane has shut nine refineries with a combined capacity of 2m barrels per day, or about 12.5 per cent of US refining capacity. It has also shut 1.4m b/d of crude oil production, or about 90 per cent, of the US Gulf of Mexico output, and 88 per cent of the region’s natural gas.

With US refineries near capacity and the amount of oil output lost equal to the world’s spare oil production capacity, the industry is vulnerable to price spikes because there are few options to overcome a significant supply disruption.

The 33 per cent rise in US petrol futures this week to a record $2.90 a gallon, which equates to a remarkable $121.80 a barrel, was the key driver behind the oil price rally to record levels. As refiners see their petrol-making margins rise above an eye-catching $50 a barrel, traders have pushed crude oil prices higher to get a slice of the bonanza.

Electricity
The situation is dire in the region, with more than 2.2 million people without power:

(From the same Dept. of  Energy‘s update, which has more detailed information State by State and utility by utility.)

Some areas will be without power for a while, as poles are down, and equipment is under water. Crews are converging from the rest of the country to reestablsih services.

Natural gas and power prices

This has been somewhat neglected in the discussions about oil, but natural gas production has been interrupted as well (as indicated above), and this has had a bigger impact on natural gas prices than on oil prices, as shown in the graph below: prices jumped by more than 25% from an already high level.

Now this is important because natural gas prices effectively determine electricity prices, with a lag. Coal fired and nuclear plants are cheaper, but they are online pretty much all the time and the price for electricity is determined by the price for additional capacity, which comes today almost exclusively from gas-fired plants (low cost producers will get a windfall, but that’s another story).

A lot of gas-fired plants have been built in the past 15 years, and the general expectation was for gas-prices in the 2-4 $/mbtu range (that made prices similar to that of coal-fired plants). Now that gas costs 3-4 times more, power prices are set to increase by 50-100%. It won’t happen overnight, as there are long term supply contracts in place and regulated tariffs, but it will trickle through in the coming months (unless regulators block retial prices, in which case utilites will be squeezed between higher wholesale prices and lower retail prices, triggering a new Californaia-like crisis).

This is the real sleeper story for next year.

Ports

The South Louisiana Port is the largest in the Us and the 5th largest in the world and it has been impacted by hte hurricane, to an extent unclear at this point. With personnel missing, access roads made difficult, US trade for large swathes of the region could be made more difficult.

The LOOP (Lousiana Offshore Oil Port), the biggest oil import facility and the only one able to receive supertankers was shut down on Sunday and is slowly starting to reopn. But as I pointed out in diary yesterday, the port is only accessible by only one road which appears to be closed. That will make it difficult to return to normal activity, even if tankers can be downloaded and the oil sent off by pipeline, as seems to be the case already.

Wheat

One sector where the closure of the port facilities will have an impact is on wheat. This comes at the peak time for US whaet exports, and it comes in a market where poor crops in other countries have led to a smallish worldwide shortage for the year. Delays or reduction in US exports could have a major impact on prices for the commodity. and guess who the major importers are? China and the Middle East.

Economic indicators

FT
energy costs were 7 per cent of household income in 1960, 9 per cent in 1980 during the second oil crisis, and about 4 per cent last year. (…) petrol, power and natural gas prices had doubled since last summer, and were taking a larger share of household spending.

So, with today’s prices, gasoline and energy are already as expensive to US consumers that they were at the worst of the 1979-80 crisis.

Flurry of bad signals for US economy

Wall Street was unsettled yesterday by deepening investor fears over the US economy and high oil prices. These worries were starkly highlighted by a series of negative signals – the start of an inversion of the US Treasury yield curve, the biggest-ever monthly decline in an index of manufacturing activity from the Chicago area and a downward revision of US growth in the second quarter.

(…)

The Chicago purchasing managers index – a barometer of business activity in the midwest – came in at 49.2 for August, the lowest level since April 2003. The level was far below economists’ expectations of 61.5 and July’s reading of 63.5. A reading below 50 indicates contraction.

(…)

“The combination of a yield curve starting to invert and high oil prices sends a strong message to investors that the US economy is set to slow,” said Anthony Crescenzi, chief bond market strategist at Miller Tabak, a brokerage.

GlobalInsight provides some scenarios here. The best case sees 60-75$ oil, 2.50-3$ gasoline ans slower growth. The worst case sees 70-100$ oil, 3,50$ gasoline and zero growth for the rest of the year.

International considerations

The FT notes that :

The US has no emergency reserves of petrol while commercial reserves are near a two-year low and dwindling by the day as refiners are unable to replenish their storage tanks.

This is where Europe, the second player in this tug of war, comes into the fray. The EU stipulates that countries must also hold reserves, not only of oil but of petrol. There are 52m barrels of petrol reserves worldwide, most of them in Germany, France, Italy and Spain. But whether it is politically feasible for Europe to send the US petrol while Europe’s own prices are at record highs is unclear.

The first signs are not promising. Wolfgang Clement, Germany’s economy minister, yesterday implied the petrol shortages in the US were at least in part its own fault.

Whether the US would want to accept such aid is also far from certain.

Relations with Europe could sour on this pretty quickly. The article also notes that relations with Saudi Arabia, the other player in that game, will not be simple either.

Menawhile, Indonesia has to grapple with the consequences of its policy of subsidising gasoline for its population. At current prices, the subsidies will cost the central budget 14 billion dollars, or a third of its total spending. The Indonesian currency has seen a run agaisnt it as this is seen as unsutainable – but reducing subsidies and increasing prices threatens riots…

Altogether, the extent of the damage is not fully known, but is likely to be major, and may appear in the most unexpected places. The economic impact of the total devastation of a whole region is unknown; the impact of higher oil and gasoline prices, and later of power prices, on US consumption will be significant and could trigger the long feared bursting of the housing bubble.

LA 1 south of the Leeville Bridge is still closed

(map and pic. from here. Click on each for bigger version)

Why does this matter?

Oil Artery Clog Could Impact U.S. (2003)

Eighteen percent of the entire nation’s energy supply depends on a deteriorating, narrow two-lane road surrounded by water in South Louisiana.

(…)

If LA 1 is impassible, it also halts shrimp and oysters shipments to restaurants across America.

This is the southernmost stretch of Louisiana Highway 1, providing the only land-based access to Port Fourchon, which supports 75 percent of all the deepwater oil and gas production in the Gulf, according to the LA 1 Coalition, comprised of private and public stakeholders intent on saving and improving the roadway.

The Port also is the site of the booster pumps that carry crude oil from the Louisiana Offshore Oil Port (LOOP) to underground salt dome storage areas in Galliano, along Highway 1.

Even on a good day, water laps close to the edges of this vital strip of concrete roadway, which not so long ago was surrounded by marshland. Besides its crucial role in the country’s energy supply, the highway serves as the hurricane evacuation route for residents in southern Lafourche Parish and Grand Isle, as well as 6,000 offshore oil and gas employees.

Today, it’s a sitting target for the next big hurricane, which can strike at any time during the annual June 1 to November 30 season.

You don’t believe librul activists? Here’s Norman Mineta:

REMARKS FOR THE HONORABLE NORMAN Y. MINETA SECRETARY OF TRANSPORTATION – MAY 19, 2005

This small and vulnerable road is the only access route to Port Fourchon – a port that supports close to one-fifth of the Nation’s oil and gas refining capacity and nearly 25 percent of Louisiana’s commercial fishing catch.

Port Fourchon has expanded dramatically in the last 25 years – from 25 acres in 1980 to over 700 acres in 2005. And estimates project that the truck traffic alone on Route 1 will grow by more than 40 percent through 2010.

It is clear that a two-lane road that floods at the sight of rain is no longer adequate to service this vital Gulf port.

(…)

But the only way that these maintenance materials and equipment can make their way to Port Fourchon in the first place is on trucks traveling on LA 1. So when a storm or an accident renders this road impassable, it disrupts operations on the offshore rigs, slowing down oil and gas production and service to maintain the integrity of our pipelines.

If LA 1 is impassible, it also halts shrimp and oysters shipments to restaurants across America.

The shrimp thing was to bring a little bit of levity, but we’re there. With the road closed, it is not possible to get access to the LOOP (the offshore port that handles the super tankers and 1,000,000 b/d worth of oil), and it is not possible to get access to the bases servicing the offshore platforms. It means more delays to assess damages, let alone repair them.

90% of the oil and gas production in the Gulf is currently down, and the LOOP has no power anymore.

And BigOil is not optimistic:

Oil majors count the cost of Katrina

David O’Reilly, Chevron chief executive, said experience of previous hurricanes suggested it could take days to assess accurately the extent of the damage caused by Hurricane Katrina even after initial aerial surveys.

“My caution is, don’t count on the initial assessment to tell the whole story,” he said in an interview in Jakarta, the Indonesian capital. “It didn’t the last time, and it may not this time. And there’s a lot more damage onshore  to the communities onshore  than there was from [last year’s Hurricane] Ivan.”

He said some people had at first dismissed Ivan’s impact as nothing. “As we really got into it as an industry –  I’m not talking about Chevron alone -… we found lots of challenges, pipelines that had been dislocated, so that even if our platform was up and running we had nowhere to put the oil.”

In total, hurricane Katrina has shut down more than 1.4m barrels of oil a day, about 7 per cent of US demand. The number is almost exactly equal to the maximum amount of spare oil capacity left in Saudi Arabia, the world’s largest supplier of oil, which has already offered to increase production to make up for the shortfall. [Yeah right. All they have to offer, if anything at all, is sour oil which cannot easily be used in most refineries. – JaP]

Nearly 2,800 platforms, more than 500 of them manned, were within Katrina’s path. About 1,100 of those platforms were exposed to hurricane force winds in excess of 74 miles an hour, before Katrina faded into a storm.

The Mars platform, one of the Gulf’s biggest producers of oil and gas, has sustained some damage, Royal Dutch Shell, the operator, said. But not only production wells have been affected.

Exploration rigs, of which there are almost no spares available worldwide because of surging demand from oil companies keen to cash in on the high oil prices, were also within the path of Katrina.  

More than half of the 231 rigs exploring for oil in the Gulf were hit by Katrina. Overall 117 rigs, valued at a total of $7bn (€5.7bn, £3.9bn) had to weather the storm, rigzone said.  

Valero, a top US refiner, estimates it will be up to two weeks before its St Charles refinery can re-start: the facility still has no power, experienced 3ft of flood water in some units and will have to repair pumps, electric motors and electrical switchgear. Valero also suffered minor damage to its cooling towers, and insulation was knocked off several tanks.

“We do not know when employees will be allowed to return to the area and begin reporting back to work,”

HiD provided a more upbeat assessment of the situation on the refining front, but the loss of oil production and imports could last much longer.

And that’s of course in addition to all the desolation, destruction anddeath that we have yet to assess.

A diary originally posted on the European Tribune by Fran and slightly extended (with maps) by Jerome

This week I saw the following BBC feature repeatedly and every time it catched my attention.

US people getting fatter, fast

Americans are getting fatter at a rate never seen before, a report shows.

In the past year, the adult obesity rate rose in 48 of America’s states, and nationally from 23.7% to 24.5%, Trust for America’s Health found.

In 10 states, over a quarter of adults are now obese, despite campaigns alerting people to the dangers of over-eating.

Mississippi, famous for its calorific mud pie, ranked the highest, followed by Alabama and West Virginia.

(white means “no information” in the maps below. The colors show the percentage of obese people, per State)

1987:

1992:

1997:

2003:

I have been traveling to the US for decades now and every time I was amazed at the kind of obesity I saw. People here where overweight too, but not in the soft flappy why I got to see in the US and it was hard to imagine that it could get worse, but this is what seems to happen.

Crisis point

The non-profit organization said the situation had reached crisis point and current policies were failing.

Currently, about 119 million, or 64.5%, of US adults are either overweight or obese.

According to projections, 73% of US adults could be overweight or obese by 2008, Trust for America’s Health warned.

I do agree with the conclusion about the poor nutrition. Maybe one could even go further considering it to be starving. Nutrition is not just about calories, especially not empty calories and as long as the body does not receive what it needs for a healthy and well-functioning metabolism it will signal hunger as it starves and is hungry to get what it needs.

“We have a crisis of poor nutrition and physical inactivity in the US and it’s time we dealt with it.”

The trust says more needs to be done to tackle inactivity and poor diet, focusing particularly on schools to prevent bad lifestyle habits being learned in childhood.

But this is not just about the US. As described in the BBC feature this phenomenon can also be observed in the UK

“We have seen this year-on-year rise in obesity in the US that has been mirrored in the UK. We know we are only about seven years behind them.

“When will we in this country wake up and smell the coffee?

“The Americans have woken up to it before and clearly they are still in a state of policy paralysis.

“In this country, the government is working very hard to try and develop a strategy for obesity but at the moment very little practically is being done.

“It really is time that we got our finger out and started making real changes.

“This is no cosmetic irritation, it is a serious medical problem.”

But again it is not just the UK it seems to affect all of Europe. I wrote about above, that this soft, flabby kind of obesity was for associated with the US. Well, that has changed – I think about 5 years ago I started to see some of this here in Switzerland too, and over the last two or three years it has visibly increased.

I do agree again with the BBC feature that one of the solutions, if not the only, is education. I wanted to link to an article from the Independent about a program in French schools, which must have been published something over a year ago, but could not find it anymore. Thus, I was happy to find the following feature in my local newspaper:

Learning about food and physical exercise with «Tacco & Flip»

THE BASEL-LAND NUTRITION PROJECT AT ELEMENTARY SCHOOLS IS GOING INTO ITS SECOND ROUND

The lure of fast food is omnipresent. Fast food chains are everywhere. 30% of the kids are overweight. «Tacco & Flip» want to counter this trend.

In the USA, where fast food was invented, obesity is one of the major health problems these days. And since the fast food wave has washed across nearly every continent in the meantime, this is an increasing problem for us here, too. This makes it all the more important that the issues of lack of physical exercise and uncontrolled food intake (for which not only fast food can be held accountable) are tackled early – i.e. from birth.

Very often this works well as long as the parents are around, but not always. The following figures show this clearly: 60% of the kids have a weak or damaged posture; 40% have a weak cardio-circulatory system; 40% have muscular and stamina deficiencies; and 30% are overweight. These figures are alarming.

These are frustrating numbers and I do hope that education will help to improve the situation.

The project aims at a balanced energy exchange for kids, learning about healthy nutrition in a playful way, and adequate physical exercise – i.e. more of it again. Irène Renz, head of Health Promotion stated that obese kids are not singled out for therapy within this project. The project addresses all kids.

But while writing this, I was also wondering if this is not a more systemic problem of our society – the obesity only a symptom of its malfunction, that includes more than just food and if not tackled will have grave consequences for society as a whole.

What do you think?

I am pleased to cross-post here below this article which appears in the August 19, 2005 edition of the Wall Street Journal (sub. only) and is posted over at the European Tribune with the permission of the WSJ editor.

Can-Do France

By JEROME GUILLET

August 19, 2005

As Martin Hirsch recently wrote in Le Monde, the problem with France is best encapsulated by the recent contest for the 2012 Olympics: For London, it was the icing on the cake, whereas for France, it would have been the cake. In striking contrast with Tony Blair’s Britain across the Channel, which is economically strong, confident and even culturally seen as more dynamic, France struggles under persistently high unemployment (10% of the work force and more than 20% of the young), a discredited political class and an aging, lame-duck president. Little wonder then that the French feel so gloomy.

MORE BELOW:
The recent political brouhaha around Danone, which the French public feared could be the possible “victim” of a takeover by America’s PepsiCo, is thus seen as a symbol of the prevailing attitude in the country: a rejection of globalization, a desire to defend whatever’s left of the country’s past successes against foreign invasions, and a general sense that France is losing control of its destiny.

And yet, look at it another way. Why would an American company, presumably motivated only by the search for profit, want to put $25 billion in a French company, which comes with a supposedly rigid work force and stagnant markets?

Only a few months ago, Danone was actually criticized in France for putting too much emphasis on shareholder value (more than 40% of its shareholders are already “Anglo-Saxons”) and closing a couple of factories. “Les Lu,” the fired workers named after the famous biscuits produced in these factories, even became a symbol for the victims of “ultra-libéral” layoffs. And now, that same company suddenly becomes a symbol of the outdated French “model”?

The French love to complain, but the contradictory discourse that we hear today hides the fact that French corporations — the Renaults, Totals, AXAs, BNP Paribas — are successfully integrated in the world economy, generate record profits and are well represented in the Fortune Global 500 Index (where France has 39 companies listed, and Germany and Britain only 37 each). In fact, Danone is a fairly typical example of how large French firms have adapted to global competition, carved out quite a bit of the international market and focused on shareholder value — all while keeping a French identity.

But what about the rest of the country? It is often said that the very high French productivity, which makes such results at all possible, is simply a mechanical result of France’s low work-participation rate. And what’s the use of high-performing companies if the rest of the country can’t keep up?

The fact is that average French GDP growth per capita over the past 10 years (2%), has been very similar to that in the U.K. (2.3%) and the U.S. (2.1%). More interestingly, as pointed out in a March article by Denis Clerc in “Alternatives Economiques,” France has actually enjoyed stronger job growth than the U.K. over that period (14% vs. 11%), and fewer of those jobs were created in the public sector — 300,000, or 15%, of the new jobs in France are government jobs, versus 860,000, or 45%, in Britain.

In that sense, the higher unemployment rate in France comes from the fact that the French working-age population during that period has increased by 12% compared to only 6% in Britain.

Thus, the French economy looks weak compared to the U.K. only when using selective data — notably by focusing on the last two years, which is the only period in the last 10 years when the U.K. economy really outperformed the French economy. One must also not neglect the fact that British Chancellor of the Exchequer Gordon Brown has been on a Keynesian spending binge in recent years, underpinned by a housing boom, which has provided a lot of fuel to general consumption.

Now, with interest rates higher than in recent years (despite the recent cut by the Bank of England), and with the oil windfall disappearing (the U.K. is becoming a net oil importer just when raw oil prices are at record highs and thus sure to bite), the U.K. economy suddenly is looking not so perky.

However, the fact remains that the U.K. jobless rate is lower and this indicator reflects a real difference in the economic, social and psychological situation of a large segment of the French society. France chose to deal with the global economic crisis during the 1970s and then later on with globalization by forcing a small portion of its working-age population (the immigrants, the young, the workers in smaller firms) to bear the full brunt of these shocks while protecting the “core group” — the middle-age, public-sector or large-enterprise workers.

Not surprisingly, these privileged workers see their children or their neighbors struggle and they cling on even more resolutely to the social benefits and advantages they have. The logical solution would be to even out the situation and share the burden among all, but everyone feels that this only means weakening the fate of those still protected without improving the condition of the most vulnerable.

Similarly, in the European Union, where France still wields a lot of power, Paris chooses to spend all its energy and political capital to defend the divisive Common Agricultural Policy, a policy of the past that in need of a real overhaul.

This reflects a failure of the political class and the political system; unemployment was the “price” chosen by France to go through the crisis in the expectation that it would be limited and temporary. Now that it has become a widespread and permanent feature of the economy, one that is obviously unbearable to society, the politicians should have changed macroeconomic policies. But the French political class has seen very little renewal and policies have been virtually identical. President Jacques Chirac, already a minister under de Gaulle 40 years ago, is the embodiment of that class whose main goal seems not to run the country but to conquer power — not as a means to an end but as an end in itself. Mr. Chirac wasted his first term and did even less during his second term, which he only won because the left rallied behind him to defeat Jean-Marie Le Pen. He has been content to surf on the mood of the day, benefiting from his anti-American position on Iraq since 2002, and not actually doing anything. The French sense this, and are certainly keen for reforms, if those are properly explained. What they do not tolerate is “more of the same,” and a lot of the vote for Mr. Le Pen and for the extreme left is a vote against the current incompetent political class that simply offers no real alternatives. Everybody is waiting for 2007 in the hope that a “real” leader will emerge, but it is hard to see who that might be. Even Nicolas Sarkozy has been around already 25 years and has strong statist control instincts, as shown during the Alstom and Sanofi-Aventis episodes when he was hostile to foreign takeover attempts of these French national champions.

France has problems, but none that makes it the sick man of Europe as one would conclude from reading both the French- and English-language press, and none that could not be solved within a few years by following policies that build on the strengths of the country — its infrastructure, a well-educated and productive work force, a dynamic population that accounts for 60-80% of Europe’s natural population growth, and efficient companies. These strengths must not be drowned by the incompetence of fear-mongering and profoundly reactionary politicians.

The only question is, when will France finally get the leaders it deserves?

Mr. Guillet is an investment banker in Paris and the editor of a political Web log, the European Tribune (www.eurotrib.com).

[this article is appearing in this morning’s European version of the Wall Street Journal. Jerome Guillet (aka Jerome a Paris) is the editor of European Tribune]

By Jérôme Guillet

As Martin Hirsch recently wrote in Le Monde (dated 23 July), the problem with France is best encapsulated by the recent contest for the 2012 Olympics: For London, it was the icing on the cake, whereas for France, it would have been the cake. In striking contrast with Tony Blair’s Britain across the Channel, which is economically strong, confident and even culturally seen as more dynamic, France struggles under persistently high unemployment (10% of the work force and more than 20% of the young), a discredited political class and an aging, lame-duck president. Little wonder then that the French feel so gloomy.

:::flip:::
The recent political brouhaha around Danone, which the French public feared could be the possible “victim” of a takeover by America’s PepsiCo, is thus seen as a symbol of the prevailing attitude in the country: a rejection of globalization, a desire to defend whatever’s left of the country’s past successes against foreign invasions, and a general sense that France is losing control of its destiny.

And yet, look at it another way. Why would an American company, presumably motivated only by the search for profit, want to put DOLLARS25 billion in a French company, which comes with a supposedly rigid work force and stagnant markets?

Only a few months ago, Danone was actually criticized in France for putting too much emphasis on shareholder value (more than 40% of its shareholders are already “Anglo-Saxons”) and closing a couple of factories. “Les Lu”, the fired workers (named after the famous biscuit produced in these factories), even became a symbol for the victims of “ultra-libéral” layoffs. And now, that same company suddenly becomes a symbol of the outdated French “model”?

The French love to complain, but the contradictory discourse that we hear today hides the fact that French corporations–the Renaults, Totals, AXAs, BNP Paribas–are successfully integrated in the world economy, generate record profits and are well represented in the Fortune Global 500 Index (where France has 39 companies listed, and Germany and Britain only 37 each). In fact, Danone is a fairly typical example of how large French firms have adapted to global competition, carved out quite a bit of the international market and focused on shareholder value–while all the time keeping a French identity.
But what about the rest of the country? It is often said that the very high French productivity, which makes such results at all possible, is simply a mechanical result of France’s low work-participation rate. And what’s the use of high-performing companies if the rest of the country can’t keep up?
But the fact is that average French GDP growth per capita over the past 10 years (2%) has been very similar to that in the U.K.(2.3%) and the USA (2.1%) More interestingly, as pointed out in a March article by Denis Clerc in “Alternatives Economiques,” France has actually enjoyed stronger job growth than the U.K. over that period (+14% vs. +11%) , with fewer jobs created in the public-sector than the U.K. (300,000, or 15% of the new jobs, versus 860,000, respectively 45%).
In that sense, the higher unemployment rate in France comes from the fact that the French working-age population during that period has increased by 12% compared to only 6% in Britain.

Thus, the French economy only looks weak compared to the U.K. when using selective data–notably by focusing on the last two years, which is the only period in the last 10 years when the U.K. economy really outperformed the French economy. One must also not neglect the fact that U.K. Chancellor of the Exchequer Gordon Brown has been on a Keynesian spending binge in recent years, underpinned by a housing boom, which has provided a lot of fuel to general consumption through house equity withdrawals. (WHAT ARE HOUSE EQUITY WITHDRAWALS? [– that’s increasing your mortgage – whether by increasing the tenor, the payments or renegotiating the interest rates, and getting cash for it. Shouldn’t the WSJ readers be familiar with this?).]

Now, with interest rates higher than in recent years [despite the recent decrease by the Bank of England], and with the oil windfall disappearing (the U.K. is becoming a net oil importer just when raw oil prices are at record highs and thus sure to bite), the U.K. economy is suddenly looking not so perky.
However, the fact remains that the U.K. jobless rate is lower and this indicator reflects a real difference in the economic, social and psychological situation of a large segment of the French society. France chose to deal with the global economic crisis during the 1970s and then later on with globalization by forcing a small portion of its working-age population (the immigrants, the young, the workers in smaller firms) to bear the full brunt of these shocks while protecting the “core group”–the middle-aged, public-sector or large-enterprise workers.

Not surprisingly, these privileged workers see their children or their neighbors struggle and they cling on even more resolutely to the social benefits and advantages they have. The logical solution would be to even out the situation and share the burden among all, but everyone feels that this only means weakening the fate of those still protected without improving the condition of the most vulnerable.

Similarly, in the European Union, where France still wields a lot of power, Paris chooses to spend all its energy and political capital to defend the divisive Common Agricultural Policy, a policy of the past in need of a real overhaul, instead of focusing on how to make Europe work better.

This reflects a failure of the political class and the political system; unemployment was the “price” chosen by France to go through the crisis in the expectation that it would be limited and temporary. Now that it has become a widespread and permanent feature of the economy, one that is obviously unbearable to society, the politicians should have changed macro-economic policies. But the French political class, despite being repeatedly rejected in all elections in the past 20 years (with the incumbent losing each time), has seen very little renewal – and policies have been virtually identical throughout. President Jacques Chirac, already a minister under de Gaulle 40 years ago, is the embodiment of that class whose main goal seems not to run the country but to conquer power–not as a means to an end but as an end in itself. Mr. Chirac wasted his first term and did even less during his second term, which he only won because the left rallied behind him to defeat Jean-Marie Le Pen. He has been content to surf on the mood of the day, benefiting from his anti-American position on Iraq since 2002, and not actually doing anything. The French sense this, and are certainly keen for reforms, if those are properly explained. What they do not tolerate is “more of the same,” and a lot of the vote for Mr. Le Pen and for the extreme left is a vote against the current incompetent political class that simply offers no real alternatives. Everybody is waiting for 2007 in the hope that a “real” leader will emerge, but it is hard to see who that might be. Even Nicolas Sarkozy has been around already 25 years and has strong statist control instincts, as shown during the Alstom and Sanofi-Aventis episodes where he was hostile to take-overs by respectively Siemens or Novartis which made industrial sense but meant foreign control of these industrial “jewels”.

France has problems, but none that makes it the sick man of Europe as one would conclude from reading both the French- and English-language press, and none that could not be solved within a few years by following policies that build on the strengths of the country–its infrastructure, a well-educated and productive work force, a dynamic population that accounts for 60-80% of Europe’s natural population growth – and efficient companies. These strengths must not be drowned by the incompetence of fear-mongering and profoundly reactionary politicians.
The only question is, when will France finally get the leaders it deserves?

Mr. Guillet is and investment banker in Paris and the editor of a political weblog, the European Tribune
http://www.eurotrib.com