s it paranoia or just proper preparation? These days, just the specter of a hurricane can raise oil prices. Before Isaac, the category 1 hurricane, even hit the Gulf Coast, oil refiners were ready to shut down production.
The Associated Press reports, “Nearly 94 percent of oil production in the Gulf, or 1.3 million barrels per day, has been halted, the U.S. government said Tuesday.
"At least 1 million barrels per day of refining capacity is expected to be shut down, which is about half the refining capacity in the storm's predicted path. The U.S. consumes about 19 million barrels of oil products per day.”
In response and to act against a massive spike in oil prices-like those consumers saw in 2005 with Hurricane Katrina-the Group of Seven finance ministers (G7) and President Obama have called on the International Energy Agency to release oil from the US emergency reserves to keep fuel prices in check.
"We encourage oil-producing countries to increase their output to meet demand," a statement from the G7 said today. "We stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied."
Energy analysts have said they don’t expect extensive damage to oil and gas infrastructure if the storm stays in line with their current projections. New Orleans has also been through the storm and is-at least in theory-better equipped to handle this hurricane.
Also, the election of President Barack Obama and New Orleans Mayor Michael Landrieu should assuage some fears. Both men appear to be more poised and prepared to handle this storm than their predecessors.
When Katrina leveled the coast, it caused $108 billion in damages, more than the next three costliest hurricanes in American history combined. The price of gas also jumped more than 50 cents after the hurricane, giving Americans a previously unfathomable $3/gallon gas price tag.
Despite more than 94 percent of oil production ceasing to exist in the gulf, as of right now the price of Brent crude oil, the best predictor of gas price trajectory, is only up .01 percent.