Katrina, which has unleashed a catastrophic storm on New Orleans, Gulfport, Mobile and other cities located on the Northern Gulf of Mexico, has greatly impacted the oil industry. Rigzone.com says 25% of our nation's oil is produced in the impacted area.
The Gulf of Mexico accounts for about 25% of the nation's energy production, while refineries hit by the storm account for nearly 10% of the nation's refining capacity.
At least five big Gulf Coast refineries also remained shut, as was the Louisiana Offshore Oil Port, or LOOP -- the nation's only deepwater oil terminal.
The LOOP typically receives tankers delivering about 1 million barrels of crude oil a day, or 10% of the nation's imported crude.
Problems getting into the area have made it difficult for the oil industry to do a damage assessment. But at a minimum: refineries may be damaged; workers may be homeless, hurt or missing; damage to roads; and lack of power will make getting the area back up to its full capacity very difficult. CNN has an article citing experts that warn consumers their worst fears have been realized: $4 gas.
"There's no question gas will hit $4 a gallon," Ben Brockwell, director of pricing at the Oil Price Information Service, said. "The question is how high will it go and how long will it last?"
OPIS tracks wholesale and retail oil prices and provides pricing information for AAA's daily reports on fuel prices.
Brockwell said with gasoline prices now exceeding $3 a gallon before even reaching the wholesale level, it "doesn't take a genius" to expect retail prices to hit $4 a gallon soon.
"Consumers haven't seen the worst of it yet," Brockwell said.
Bloomberg reports that U.S. Energy Secretary Samuel Bodman says the White House has already made the decision to tap into the emergency oil reserves.
Bodman, speaking on CNBC television, today said the government can meet a request for oil by tomorrow. He said domestic gasoline supplies are a ``concern.''
``It certainly has got to have a dampening effect'' on prices, said Tony Machacek, a broker at Bache Financial Ltd. in London. ``It will help, but whether it's enough to keep the market down in the long term remains to be seen.''
It will clearly take some time before the full impact of Katrina on the oil and gas industry is known. In the short term it looks like more pain for drivers at the pump and more interest in hybrid automobiles. A collection of links about Hurricane Katrina can be found here.
