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Gas prices unlikely to skyrocket as oil companies assess damage from Ida: NPR


Customers in Laplace, Louisiana, learn that a station is out of gas after queuing for more than an hour on August 30. Hurricane Ida made landfall southwest of New Orleans on August 29 as a Category 4 storm.

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Gas prices unlikely to skyrocket as oil companies assess damage from Ida: NPR

Customers in Laplace, Louisiana, learn that a station is out of gas after queuing for more than an hour on August 30. Hurricane Ida made landfall southwest of New Orleans on August 29 as a Category 4 storm.

Scott Olson / Getty Images

Oil companies are still assessing the damage to oil rigs, platforms and refineries that were hit by Hurricane Ida.

But so far, signs point to a limited impact on gasoline availability and prices. AAA has warned of price volatility, and several analysts expect temporary price increases of several cents, but experts do not expect a dramatic or prolonged disruption in the market.

“It’s not Katrina,” says Richard Joswick, head of petroleum analysis at S&P Global Platts. After Hurricane Katrina made landfall – exactly 16 years earlier – gas prices immediately rose 45 cents and remained high for two months.

More than one million homes were without power after Hurricane Ida made landfall as a powerful Category 4 storm on Sunday night. tropical storms due to global warming.

Oil companies check for damage; Exxon resumes normal activities

As Hurricane Ida approached, oil companies rushed to evacuate personnel and shut down operations in the Gulf of Mexico, as is common practice with a major storm approaching.

On Sunday, the Bureau of Safety and Environmental Enforcement reported that 95.65% of oil production in the Gulf of Mexico had been closed or temporarily closed, as well as 93.75% of natural gas production.

These are mind-blowing percentages. But the key question for the oil markets is whether any of the infrastructure has been damaged. Otherwise, Gulf producers could restart drilling and pumping in a few days; if the equipment was broken by the storm, however, they could go offline for much longer.

The companies are currently in the process of verifying the damage. ExxonMobil reports that its Hoover platform was not damaged and is in the process of resuming normal operations. Shell confirmed that three rigs that were in the path of the storm are “all intact and in place”, although they have no estimate of when production will resume. Other operators, including BP and Equinor, say it’s too early to provide an update.

Energy data firm Enverus generally states that “early reports do not suggest that there has been serious lasting damage to oil infrastructure.” U.S. crude prices edged down on Tuesday, suggesting markets are not worried about a lack of supply.

Refineries struggling with widespread power outages

In addition to offshore platforms in the Gulf of Mexico, a number of refineries along the Louisiana Gulf Coast were affected by the storm. The Department of Energy reports that at least nine refineries have partially or totally reduced production, with about 13% of US refining capacity affected.

The storm’s most devastating winds passed just east of major refineries, but flood damage remains a concern. And direct storm damage isn’t the only risk. Refineries need electricity too – and Hurricane Ida cut power to much of Louisiana and Mississippi, with more than a million customers in the dark.

Damage assessments are still ongoing, and while refineries are doing unscathed from the storm, it’s unclear how long it will take to restore power to all facilities. Some analysts predict it could take weeks, which could significantly disrupt regional gasoline production.

The Environmental Protection Agency has issued a waiver for Louisiana and Mississippi, allowing the sale of winter gasoline in the region to address concerns about the fuel supply. (Normally the EPA requires the use of less volatile and slightly more expensive fuel in the summer, otherwise hot weather will create more dangerous gas fumes.)

The impact on prices is expected to be modest; The United States is now less dependent on Gulf oil

Despite the substantial disruption in oil production and refining, most analysts anticipate a relatively small impact on the market as a whole.

It’s not the same as no Impact: Gasoline prices have already risen by several cents per gallon, and storm-influenced price fluctuations could continue for a few weeks. And gas prices were high this summer to begin with. But we are a long way from the intense and prolonged disruption that Hurricane Katrina memorable caused.

There are several reasons for this. America’s oil markets have changed dramatically over the past 16 years. The United States is less dependent on crude production in the Gulf of Mexico than before, thanks to the boom in shale oil produced in Texas and New Mexico. The United States is also exporting more refined petroleum products out of the Gulf and, in a pinch, can redirect those exports to meet domestic needs.

Joswick, of S&P Global Platts, also claims that the lengthy outages after Katrina have had an impact on businesses. “The refiners have learned the lesson,” he says. “They hardened their facilities. They lifted essential equipment off the ground so it wouldn’t get flooded, for example.”

He notes, however, that if a second storm hits the region while production is still recovering, the damage could be much worse.

Climate change – caused by greenhouse gas emissions, much of which comes from the combustion of petroleum products – is causing more damaging storms in the Gulf of Mexico. As the oil industry comes under increasing scrutiny for its contributions to climate change, producers are also grappling with the current consequences.