Hurricane Ike Spikes Gasoline Prices as Oil Prices Fall
September 17, 2008
Hurricane Ike brought a massive storm surge to Galveston, Texas, and surrounding communities on September 13, and although the toll in property damage, injuries, and deaths remains unknown, federal agencies are already getting a grasp on the impacts to oil and gas infrastructure in the Gulf of Mexico and along the Texas coast. According to the Minerals Management Service (MMS), 28 of the 3,800 offshore oil and gas production platforms were destroyed by Hurricane Ike, and several other platforms are significantly damaged. Most of the destroyed platforms were old and small, and the MMS estimates the damage impacts at about 11,000 barrels per day of oil production and 82 million cubic feet of natural gas production, or about 1% of Gulf oil and natural gas production. As of September 16, 97.2% of oil production in the Gulf was shut-in, along with 84.2% of the natural gas production, and those numbers are already up from the statistics for September 15. Personnel are still evacuated from 69.5% of the manned oil and gas production platforms in the Gulf. See the latest MMS press releases.
DOE's Office of Electricity Delivery and Energy Reliability is issuing status reports on the energy impact of Hurricane Ike, and as of September 16, 2.2 million customers in Texas lacked power, as well as another 1.7 million customers in seven other states. Fourteen refineries in Texas and Louisiana are shut down, with a total capacity of 3.6 million barrels per day of petroleum products, or about 20% of U.S. capacity. According to the status report, damage to the refineries is minimal, but many are lacking electrical power. Many oil and natural gas pipelines were shut down during the hurricane and are only starting to recover from the event. To help ease the impact of the supply disruptions, the U.S. Environmental Protection Agency (EPA) has issued emergency waivers of certain fuel standards for 10 southern states and Ohio, which was also impacted by the storm. DOE released 380,000 barrels of oil from the Strategic Petroleum Reserve (SPR) on September 11 to address the continuing impact from Hurricane Gustav, and released another 798,000 barrels of oil on September 14-16 to address the impacts of both storms. See the DOE status reports, the EPA fuel waivers, the latest DOE press releases, and the White House fact sheet on the federal response.
Despite the short-term impacts of Hurricane Ike on oil production, oil prices have continued to decline, according to DOE's Energy Information Administration (EIA). But the combined impact of Hurricane Gustav and Hurricane Ike has driven up gasoline prices, causing an increase in average unleaded gasoline prices of 18.7 cents per gallon from September 8 to September 15, according to the EIA, including price hikes of 34 cents per gallon in the Lower Atlantic region. The American Automobile Association's Fuel Gauge Report shows another 12-cent rise on September 16. The EIA estimated on September 16 that at least 14 million barrels of gasoline and 10 million barrels of diesel fuel have not been produced because of the storm impacts. With the increased fuel prices, the Federal Trade Commission (FTC) is working with DOE to prevent price gouging or price fixing, and DOE is accepting complaints through its Gas Price Watch Hotline. See the latest EIA reports on energy market impacts of the hurricanes and on gasoline and diesel fuel prices, the latest Fuel Gauge Report, the FTC press release, and the DOE Gas Price Watch Hotline.