Hurricane Ida hits the U.S. Gulf Coast, causing broad destruction across Louisiana and potential short-lived disruptions in supply chains
Sunday’s landfall of category 4 Hurricane Ida, downgraded to a tropical storm today, arrived on the 16-year anniversary of Hurricane Katrina that ravaged the area and caused massive destruction. As of Monday, more than 1 million residents across the state were without power while the immediate economic impact is still being assessed. The region is a vital hub for the U.S. oil industry. According to the U.S. Energy Information Administration (EIA), the Gulf of Mexico offshore oil production is responsible for approximately 17% of total U.S. crude oil production, with Federal offshore natural gas production in the region accounting for 5% of total U.S. dry production. Additionally, per the EIA, more than 45% of total U.S. refining capacity is situated along the Gulf Coast in addition to 51% of U.S. natural gas processing plant capacity.
According to S&P Global Platts, approximately 95% of total U.S. oil and gas production was offline in the Gulf as Ida made landfall on Sunday. Given the large proportion of refining in the region, it is possible that domestic gasoline prices may see an uptick should refineries be forced to remain shut for a prolonged period if damages are extensive. However, as refiners in the U.S. evaluate damage in the Gulf, the market is looking to Wednesday’s meeting of OPEC+ countries. The organization increased production by 400k barrels per day in August and is anticipated to expand production into September 2022 which should alleviate supply constraints given the dramatic cuts last year at the early stages of the pandemic. Our thoughts are with all Louisianans during this difficult time – stay safe!