Hurricane Ida Likely to Cause Oil Price Increases as 95% of Production Shuts Down in Gulf

by Jennifer Shea
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Thanks to Hurricane Ida, over 90% of the Gulf of Mexico’s oil production stopped on Saturday. And by Sunday, more than 95% of production had been shut down.

As of this afternoon, 95.7% of the region’s total oil output had paused, CNN reports. The federal Bureau of Safety and Environmental Enforcement said it had evacuated 288 oil and gas production platforms.

The sudden drop in oil supply from a major energy-producing region will probably push prices up. Oil prices were already rising last week in anticipation of Hurricane Ida.

Moreover, about half of total U.S. refinery capacity sits along the Gulf Coast. And by Saturday afternoon, 85% of the region’s natural gas production had also halted.

Hurricane Ida May Damage Some Facilities

The Gulf is responsible for about 15% of America’s oil and 5% of its natural gas, the Tennessean reports, citing the U.S. Energy Information Administration. That’s the equivalent of 1.85 million barrels of oil and 2.7 billion cubic feet of natural gas every day.

It may take some time for the Gulf to resume that output after Hurricane Ida. Facilities can’t just start running again right away after the storm passes.

For one thing, servicing the vast majority of the Gulf’s rigs and platforms are boats that use Port Fourchon in south Lafourche as their base. That port is slightly east of Ida’s anticipated landfall. And it’s under a mandatory evacuation order that kicked in on Saturday morning.

For another, regulators have to inspect the facilities for damage. Then they’ll need to make sure it’s safe to start them running again.

“After the storm has passed, facilities will be inspected,” the BSEE said. “Once all standard checks have been completed, production from undamaged facilities will be brought back online immediately. Facilities sustaining damage may take longer to bring back online.”

Will Ida Affect Pump Prices?

Louisiana refineries process roughly 3.5 million barrels of crude oil per day, per the Tennessean. That’s about 19% of America’s total refinery capacity.

Industry analysts say the extent to which Hurricane Ida affects pump prices will depend on how much damage the refineries sustain in the storm. According to Platts Analytics, at least 4.4 million barrels per day of refinery capacity sits in the hurricane’s projected path.

Platts said it expects Hurricane Ida to come ashore along the same path as other storms.

“[Those] did extensive damage to USGC refining and petrochemical facilities,” Platts added. “Many plants have been hardened against hurricanes. But disruptions in operations are still very likely due to flooding, power outages and personnel dislocations.”

Meanwhile, Patrick De Haan of GasBuddy tweeted Saturday that a small nationwide gas price hike was possible. But he said it would likely amount to a nickel or dime extra at the pump. And that likely wouldn’t hit motorists until sometime next week.

Outsider.com