Hurricane Katrina Shuts Refineries and Oil and Gas Production

August 31, 2005

While Hurricane Katrina resulted in a tragic and yet-untold loss of life and property in the Gulf Coast states, the hurricane also significantly impacted the production of oil and gas and the refining of oil into gasoline and other products. According the Department of Interior's Minerals Management Service (MMS), as of August 30th the hurricane had resulted in the evacuation of 645 platforms and 90 rigs in the Gulf of Mexico, which account for 88 percent of the natural gas production and 95 percent of the oil production in the Gulf. A press release from Williams, a natural gas company, notes that on-shore facilities such as natural gas processing plants and compressor systems were also shut down, while natural gas pipelines continued operating at reduced capacity. Press reports indicate that several oil refineries were also shut down, and of course, the region is suffering from extensive power outages. The extent of damage to these facilities is not yet known. See the press releases from the MMS and Williams.

According to Platts, an energy information company, prices of all major energy commodities in the U.S. markets rose to record levels on August 29th. Although analysts generally track next-month futures prices as traded on the New York Mercantile Exchange (NYMEX), Platts notes that real-time prices on August 29th exceeded the futures prices, particularly in the Gulf Coast region. Meanwhile, diesel fuel prices at the pump hit a new record of $2.649 per gallon on August 30th, as reported by the American Automobile Association (AAA), while average gasoline prices remained below the record price set on August 22nd.. See the Platts press release and the AAA "Fuel Gauge Report," and for the latest futures prices for crude oil and other energy commodities, see the NYMEX Web site.

Commenting on August 29th on the impacts of the storm, Secretary of Energy Samuel Bodman extended the thoughts and prayers of the entire DOE family to the people affected by the storm, and noted that DOE is working with the Federal Energy Management Agency to restore energy services. Secretary Bodman noted that the Strategic Petroleum Preserve could be used to lend petroleum to refineries if needed, but it was still too early to say if that response is warranted. See the DOE press release.