Hurricane Isaias, which strengthened into a major hurricane on Friday, is forecast to impact the Gulf Coast, potentially leading to higher fuel prices for residents in the Wiregrass region. While the storm is expected to miss the primary oil industry hubs, industry experts warn that potential power outages could shut down key refineries, straining already tight fuel supplies.
One significant facility at risk is Vertex Energy’s refinery in Mobile, Alabama, alongside Chevron’s facility in Pascagoula, Mississippi. These two operations collectively represent 2.4% of the nation’s refining capacity, according to Andrew Lipow, a Houston-based oil analyst. Lipow stated that any issues at these facilities, such as flooding or power outages, could take them offline, particularly at a time when diesel supplies are already low.
The potential for increased fuel costs comes amidst existing pressures on global supplies, which have been affected by the ongoing conflict in the Middle East and Russia’s war against Ukraine.
Carl Larry with the energy analysis firm Enverus offered varying outlooks based on the storm's intensity and duration. If Hurricane Isaias moves through quickly with minimal impacts, refineries might continue to operate at reduced capacity, leading to gasoline and diesel prices rising by just a few cents. However, Larry cautioned that if refineries, like Chevron's, are forced to shut down completely, their recovery could take weeks. Such an extended closure, Larry explained, could cause fuel prices to jump more significantly, potentially by a dollar, with diesel prices that are currently above $6 possibly "approaching $7."
However, not all experts predict a substantial national impact. Patrick De Haan, head of petroleum analysis at GasBuddy, indicated that even if the refineries take a hit, the broader gas price impacts should be minimal. De Haan estimated the affected refining capacity to be potentially under a million barrels a day, likely somewhere in the ballpark of 500,000 barrels a day. He believes this would primarily have "a small impact on gas prices, primarily in the Gulf Coast," and does not expect it to impact gas prices nationally.
Even before its potential landfall impact on refineries, Hurricane Isaias has already caused widespread shutdowns in offshore oil production across the Gulf region. This area typically supplies about 15% of the U.S. crude. According to the federal Marine Minerals Administration, personnel were evacuated from 121 production platforms, accounting for approximately a third of the facilities in the Gulf. This resulted in almost two-thirds of the region's oil production being shut down, an amount equal to nearly 1.3 million barrels, or 54 million gallons, per day. Companies such as Chevron, BP, and Shell were among those that reported evacuating personnel and shutting down platforms.
Despite these immediate disruptions, the storm’s impact on oil and gas prices thus far is dwarfed by the effect of the conflict in the Middle East. Experts anticipate that once the storm passes, workers will likely return to the offshore platforms in the Gulf and quickly resume operations, provided there is no significant damage. De Haan stated that he would expect that the shut-in oil production will probably return pretty quickly within just a couple of days.
Prices for Brent crude, the international standard, were above $104 a barrel on Friday. Over the last month, that price has fluctuated between $96 and almost $110, primarily driven by uncertainty stemming from the war with Iran.
