Hurricane Gustav shut down at least at least 25 percent of the nation's oil production and closed down the nation's main petroleum import facilities, but initial reports Monday suggested the storm spared the Gulf Coast significant damage.
The big oil companies were not expected to fully report on damages until this morning, but as anecdotal evidence mounted that the Category 2 hurricane spared the region, oil prices plunged in after-hours electronic trading on the New York Mercantile Exchange.
The exchange was closed to physical trading on the Labor Day holiday, but in electronic trading, oil prices had fallen $4.39 a barrel by late afternoon trading, to $111.07.
If there are no ugly surprises like damage to a major offshore production platform, oil could be poised to go below the $110 psychological threshold and perhaps toward $100 a barrel. Labor Day marks the close of the peak summer driving period; for motorists, that could spell relief at the pumps by mid-September.
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“Assuming there is no significant damage to the platforms or undersea lines then production would resume very quickly,” Kevin Kolevar, the Department of Energy's hurricane point man, told reporters in Washington in an afternoon news conference Monday.
Gustav forced the shutdown of 1.3 million barrels per day of oil production in the Gulf of Mexico. That complete shutdown amounted to a full quarter of U.S. oil production and about 15 percent of natural gas production nationwide.
Onshore, where the Department of Energy said 33 oil refineries were potentially affected by Gustav – with the combined capacity to refine 7.5 million barrels per day – only 12 were forced to completely shut down. That was about 28 percent of the Gulf region's refining capacity, while another 44 percent of the region's refining capacity was operating on reduced production runs.
Private inventories of oil in storage in the Gulf Coast and elsewhere in the United States leave the nation with adequate short-term supplies.
The Strategic Petroleum Reserve, oil held in underground caverns in Louisiana and Texas, is almost completely filled to 707 million barrels of oil. It too could be tapped if there was significant damage to offshore production.
“We are exceptionally well positioned to deal with temporary disruptions,” Kolevar said, adding that as of late Monday that the main pipelines carrying petroleum products to the Carolinas and the Southeast – operated by Colonial Pipeline – were operational and apparently undamaged.
The oil industry Web site Rigzone.com said Monday that offshore oil infrastructure in the Gulf is likely to have taken Gustav's punch and remained standing, unlike three years ago during the twin Category 5 storms of Katrina and Rita.