Energy Impact of Hurricane Gustav Still Unclear
September 3, 2008
Hurricane Gustav plowed through the center of offshore oil and gas production in the Gulf of Mexico on Labor Day weekend before coming ashore in Louisiana on September 1, but as of September 2, its impact on oil and natural gas production and fuel refining remains unclear. Gustav hit the offshore drilling areas as a Category 3 storm, which was weaker than anticipated, and dropped to a Category 2 storm as it came ashore. At that level, significant damage to the offshore infrastructure is not expected, and the main concern for now is the impact of power losses on oil refineries, as extended shutdowns of those refineries could impact gasoline and diesel fuel prices throughout the country. With the positive outlook for offshore production, oil prices started falling on August 29 and continued falling on September 2. See the National Hurricane Center's archive on Hurricane Gustav, the report on Gustav's impact on energy markets from DOE's Energy Information Administration, and the latest oil prices from the New York Mercantile Exchange.
DOE's Office of Electricity Delivery and Energy Reliability started issuing situation reports on Hurricane Gustav on September 1, noting widespread production impacts that are expected to be temporary. The afternoon report for September 2 finds that all of the Gulf's crude oil production and 95.4% of the natural gas production remains shut-in, with 88.2% of the Gulf's manned production platforms evacuated. The Louisiana Offshore Oil Port, essential for offloading crude oil from large tankers, remains out of service as personnel assess it for damage, and two large oil pipelines are shut down. In addition, 14 natural gas pipelines have shut down, while another eight pipelines have warned of reduced supplies or of the shutdown of processing plants and compressor stations along their pipelines. Twenty-five out of 31 natural gas processing plants were shut-in along the path of the storm.
About half of Louisiana is without power as of September 2, and Entergy is reporting extensive damage, with 191 transmission lines and 210 substations out of service. That has left New Orleans and Baton Rouge cut off from the power grid, although local power plants are supplying power to those cities. Thirteen refineries are shut down, totaling 2.5 million barrels per day of capacity, while 10 other refineries have reduced their production. For now, though, the refinery outages have not had an impact on fuel prices, as the American Automobile Association's Fuel Gauge Report recorded lower national average prices for gasoline and diesel fuels on September 2. See the latest situation report and Fuel Gauge Report.