How will hurricanes in the Gulf of Mexico impact oil production and prices?
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You probably knew it was too good to last. After a week of dropping oil prices, crude was back up Monday as oil companies closely monitor the progress of Tropical Storm Dolly as it moves across the Gulf of Mexico. Shell started evacuations Sunday. Close to 200 workers have been moved off rigs. It's an evacuation that may have more to do with Katrina and Rita than it does with Dolly. "The Gulf of Mexico now shuts down in advance of any coming storm because of our previous experience over the past several years," explained energy industry analyst John Kildruff. In many cases, refineries damaged in 2005 are still recovering. One quarter of U.S. oil and fuel production was shut down after Rita, and few can forget the So these days, what happens in the Gulf doesn't stay there for long. "Prices will be off to the races, higher once again until we can sort out the potential damage or actual damage this storm inflicts on our production of oil and natural gas in the Gulf of Mexico and on the nation's refinery breadbasket," Kildruff warned. Dolly's current projected path takes it south of major oil production fields but could send it toward three refineries near Corpus Cristi. Those refineries account for about 3% of US capacity, but oil companies remain optimistic there will be little or no impact to production this time. In the end, Dolly's biggest impact may not be to production, or at the pump, but rather as a reminder that hurricane season is just heating up. Analysts say prices at the pump could take a few days to react to Monday's bump in oil prices, so we may have a few days before we notice any increases. |
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