Oil and Gas: Supply Issues After Katrina

Abstract : Hurricane Katrina made landfall on August 29, 2005, leaving behind considerable devastation. Some onshore refineries were shut down in advance of the storm; others remain down now because of the widespread interruption of electric power and flooding. Assessment of damage to oil and gas production rigs, as well as refineries, continues. Some operating refineries whose crude supply has been interrupted are borrowing crude from the Strategic Petroleum Reserve (SPR). On September 2, the International Energy Agency (IEA) announced a coordinated drawdown of European and Asian stocks totaling 60 million barrels to be released at the rate of 2 million barrels daily. Some refineries have resumed operation, but at reduced runs. A number of major refineries remain shut. The Louisiana Offshore Oil Port (LOOP) resumed operation late September 1, and is accepting crude oil imports. The Colonial pipeline, which supplies refined products to regions of the South and Northeast, has resumed operation and is at 100% of pumping capacity. The industry advises that it may be months before the area's oil and gas production and refining are fully restored. Spot and futures prices for gasoline and middle distillates rose sharply in the days following the storm, but prices began to fall early the week of September 5. This report will be updated.