BP Closes Alaska Pipeline as GM Mulls Camaro Revival

BP announced that a pipeline in Alaska was corroded and leaking oil. It has closed the pipeline indefinitely cutting off 8% of US oil production, about 400,000 barrels a day. Over the week-end, GM announced that it would bring back the Chevy Camaro by 2008. Just what Detroit needs to produce with gas headed for $4 a gallon and oil spiking above $77 a barrel today, a V8, 400-horsepower car with no room in the back seat.

The Alaska pipeline problem is not readily solved. Oil analyst Peter Beutel, president of Cameron Hanover, told CNN, “They wouldn't be shutting down Prudhoe Bay if this wasn’t absolutely necessary. Once you shut it down, you don’t know what will happen when you come back. It could cause all types of problems.” He added, “This is almost all Alaska. It doesn’t look like something that will have a quick fix or can be ignored by the markets. I think it’s going to be measured in weeks, not days, and it could drag on for months.”

For BP, this is a bad situation all the way around. Its stock dropped 2% on the news BP America Chairman and President Bob Malone, who’s new to the job, issued a statement that read, “We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause.” No time line, no assurance that all will be well. It will, indeed, be a while.

With the price of gas inevitably rising from this drop in supply, GM’s decision to bring back one of the most popular muscle cars is dubious as a strategy. While their mileage improved since their creation by Lee Iacocca in the 1960s, the muscle car theory was lots of power derived from cheap gas. Before the Camaro went the way of the dodo, it got 29 miles per gallon on the highway (this figure is as doubtful as all other mileage figures, that is to say, dubious in the extreme). That's competitive for now, but what happens at $5 a gallon?

Today, with gas at $3+ a gallon, SUVs and other gas guzzlers are going begging. The fat margins that these carry are going away, and as a result, the producers of fuel-efficient vehicles will gain. Toyota already sells more cars in the US than Ford, largely because a Toyota is cheaper to fill and run. In July, the US car market shrank 14% year-over-year, with GM dropping 19.5%, and Toyota rising 16%. As long as that pipeline stays closed, this trend will continue. Moreover, that isn’t the only pipeline in the world that may need maintenance. Muscle cars were a nice idea, but times have changed – permanently.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home