Gas Prices Could Rise Up to 20 Cents as Hurricane Ida Shuts Down Gulf Coast Oil Production

Mandatory Credit: Photo by Steve Helber/AP/Shutterstock (12382734a)An abandoned vehicle is half submerged in a ditch next to a near flooded highway as the outer bands of Hurricane Ida arrive, in Bay Saint Louis, MissTropical Weather Atlantic, Bay Saint Louis, United States - 29 Aug 2021.
Steve Helber/AP/Shutterstock / Steve Helber/AP/Shutterstock

Hurricane Ida ripped through all of New Orleans Sunday night, leaving widespread destruction and major infrastructure damage. More than 90% of oil production in the Gulf of Mexico was paused in anticipation of the storm, bringing 17% of overall U.S. oil production, 5% of natural gas output and 15% of all U.S. refining operations to a halt.

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U.S. gasoline futures rose after the storm hit Louisiana, disrupting processing facilities across the state, Bloomberg reports. Offshore rigging platforms seem to have been spared, as many have escaped significant damage, with oil prices mostly unchanged as a result.

Due to the major flooding and power outages now taking place in New Orleans parish and other parts of Louisiana, major pipelines that transport gasoline to the east coast may be affected, energy consultant Andy Lipow told Seeking Alpha. This has the potential to affect gasoline prices throughout the east coast. Lipow added that the Category 4 storm will likely raise prices by 10 cents a gallon in the southeast and mid-Atlantic markets.

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Mark Jenkins, spokesman for the American Automobile Association, echoed the prediction. “Drivers will almost assuredly see gas prices rise this week because of Hurricane Ida’s effects on the Gulf Coast,” he told WPLG Local 10 of South Florida. “Based on overnight movement in the futures market, a 10-20 cent jump at the pump is not out of the question. Where gas prices go from here will depend on the extent of the damage and how long it will take for fuel production and transportation lines to return to normal.”

Royal Dutch Shell has entirely shut down production as its Baton Rouge plant, with Exxon Mobil cutting 50% of production. BP, Chevron, Exxon, Equinor, BHP and Murphy Oil have shut down and evacuated all of their offshore platforms, as well.

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While Louisiana took the direct landfall hit of the storm, Ida has threatened offshore operations all along the Gulf Coast. Louisiana, Mississippi, Texas and Alabama account for more than 45% of the nation’s capacity for refining crude oil into gasoline. The region is also home to nearly 2,000 offshore oil platforms, which account for roughly 17% of U.S. crude oil production.

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Last updated: August 30, 2021

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Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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