Oil industries escape Ike's wrath

by Brian Fisher Johnson
Thursday, January 5, 2012

Hurricane Ike’s damage to Gulf Coast oil industries was not as bad as authorities had feared, the Department of Energy stated in a report released Monday.

The report, which compiled accounts from government agencies and oil companies with refineries in the region, noted that oil refineries suffered “minimal damage from Ike and are making preparations to restart operations.” Louisiana’s Department of Natural Resources stated that the “basic infrastructure of the state’s oil and gas industry appears to have weathered the storm with almost no damage." ExxonMobil said its Baytown, Texas, refinery had “limited” damage, although its Beaumont, Texas, refinery was still without power. Valero Energy, the largest refinery in the U.S., cited “no significant structural damage” to its three refineries in the area. Those refineries remain shut down, but they should return to full capacity on the order of days, not weeks, says Bill Day, Director of Media relations at Valero, based in San Antonio, Texas.

Ike did shut down nearly 20 percent of the nation’s refining capacity, however, according to a Bloomberg report. Moreover, 99.6 percent of the Gulf’s crude oil capacity (1,295,223 barrels a day) is not being produced according to the U.S. Minerals Management Service. To help minimize that back-up, the Strategic Petroleum Reserve announced Sunday that it would pipe a combined 309,000 barrels a day of emergency exchange oil to a ConocoPhillips refinery in Illinois and a Placid Oil refinery in Louisiana.

Despite damages from Ike, global crude prices continued their overall post-July fall on Sunday, remaining below $100 a barrel, the lowest price in six months. But Americans will very likely face higher gas prices because of Ike’s impact on U.S. refining capacity, says Tom Kloza, chief oil analyst at the Oil Price Information Service in Gaithersburg, Md.

“Think of the U.S. Gulf Coast as the lungs of an advanced organism,” Kloza wrote Sunday in the blog, speakingofoil.com. “Hurricane Gustav partially collapsed the right lung and some of the oxygen was cut off to the American organism. Then, just as that lung was being brought back to normal, Hurricane Ike collapsed the left lung. The prognosis for the patient — in this case U.S. motorists and other end-users — is good, but we’ll be coughing and wheezing with supply outages, dislocations, and even a few gasoline lines for the next few weeks.”

The national average for self-serve, regular gasoline rose nearly 5 cents on Monday to $3.85, compared with $3.80 on Sunday, according to the Web site of the American Automobile Association. Despite the minimal damages to its refineries, Ike’s impact on Valero’s employees was significant, Day says. “A lot of [employees] suffered significant damage to their houses, so this was a pretty serious event.”

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