Hurricane Ida Slams Oil Industry, Causing Widescale Disruptions
A whopping 95% of Gulf of Mexico's oil production sites were reportedly shut down by regulatory bodies on a Sunday, signaling severe consequences on energy supply. The catastrophic storm is expected to have significant implications. The NYMEX futures contract for gasoline surged by 2.75% to $2.33 per gallon on Sunday evening, compared to $2.27 on Friday. While the U.S. crude oil prices inched up by 0.6% on Sunday, recording a value of $69.30 per barrel, versus $68.74 on Friday.
Andy Lipow, the President of Lipow Oil Associates in Houston, revealed six refineries in the New Orleans vicinity, including PBF, Phillips, Shell, Marathon, and two Walliser Luo refineries, were currently closed. He warned of potential structural damage that might occur as Hurricane Ida traverses the region. He further indicated that this impactful site, where Hurricane Ida made landfall, is infamously known for being less than favorable for the oil industry and might influence substantial pipelines carrying petroleum from the Gulf coast to Eastern marketplaces. These closed refineries total approximately 1.7 million barrels of daily refining capacity, making up 9% of the nation's total refining capacity.
Other refineries, including Exxon, Placid, and Kratz Springs, are situated in and around Baton Rouge. Lipow reported that these refineries are operating under reduced capacity and produce approximately 700,000 barrels daily, amounting to roughly 3.5% of the entire U.S. consumption.
The Bureau of Safety and Environmental Enforcement (BSEE) activated Hurricane response teams on Saturday to prepare for the impending storm. The agency confirmed the evacuation of various offshore operation facilities and platforms by offshore oil and gas operators. By late Saturday morning, 288 offshore structures had been evacuated, which represents about half of the manned operations in the Gulf of Mexico based on reports provided to the BSEE.
In order to resume operations after the storm, Lipow indicated that manufacturers must have personnel on-site to assess damages, make necessary repairs, and restore infrastructure. However, these tasks may require ample time, especially under present circumstances.
The potential loss of significant oil supply to one of the U.S.'s primary energy hubs could lead to higher oil prices. Crude oil prices had seen a sharp increase prior to Hurricane Ida's arrival.
A week following Hurricane Katrina in 2005, the national average price for a gallon of unleaded gasoline rose by 46 cents to $3.07, according to the U.S. Energy Information Administration. This price spike of 18% represented the most substantial one-week percentage increase since the Gulf War in 1991. It took two months for oil and gas prices to return to pre-Katrina levels.
-Matt Egan and Chris Isidore from CNN contributed to this report.
P.S. It's important to note that the Gulf of Mexico is a critical region for the U.S. oil industry, accounting for around 15% of the country's oil production and nearly 23% of its natural gas production[1]. Offshore Gulf of Mexico facilities alone produce about 1.7 million barrels of oil and 3.7 billion cubic feet of natural gas per day[1].
