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Ida Affects Oil Refining And Production, Oil and Gasoline Prices To Increase

Hurricane Ida temporarily halted a significant portion of U.S. oil refining and production operations. This should maintain high crude and retail gasoline prices, a report said.

Ida, now a tropical storm, moved across the Gulf of Mexico production region before making landfall on the Louisiana coast Sunday. It brought torrents of rain and high winds. More than 1 million Louisiana utility customers were without power early Monday.

Monday was a busy day for the energy industry as it tries to determine when it can restore refineries in Louisiana and oil-and-gas production in the Gulf of Mexico. These operations were temporarily shut down as a precaution.

Monday’s oil prices rose slightly after having jumped 10% last week. However, West Texas Intermediate futures — which traded at about $69 per barrel — are still down over 6.5% for the month. About 15% of total U.S. oil production came from the Gulf of Mexico, which shut down nearly all of it.

“The reaction was mixed because we avoided a worst-case scenario,” Again Capital John Kilduff stated. “But supplies remain tight and this could affect prices. This is especially true as we move into the peak period of storms and weather concerns will continue to be a concern for the market for several weeks. The supply was pretty much empty going into this.

If no damage is discovered, the shut-in operations for the Gulf of Mexico will resume as normal. As OPEC+ meets next week, the hurricane threatens supplies.

OPEC+ is widely believed to be restoring the 400,000 barrels per day of production it previously promised to return to the market. Biden had requested more supply from OPEC and Saudi Arabia.

The cartel and its partners, Russia included, will likely restore the market only to the amount they planned. Kilduff stated that “they’re not coming up to rescue us from $70 of oil.”

Crude inventories are at the lowest level since January 2020. Crude supply has fallen for three straight weeks, while fuel demand has reached its highest level since March 2020, according to data released last week by the Energy Information Administration.

Ida could cause temporary disruptions to gasoline supplies, with some refineries closing across the region. The Colonial Pipeline — a key artery transporting gasoline from Houston, across the South and up to the Northeast — was partially shut down. According to Reuters, the company stated that it expects the pipeline to resume service Monday. However, restart protocols must be followed. The terminals continued to distribute gasoline.

Andrew Lipow, President of Lipow Oil Associates, stated that gasoline prices should not be expected to fall this week. For some consumers, especially in the eastern and southern U.S., analysts expect gasoline prices will rise by 5 to 10 cents per gallon before Labor Day weekend.

The average national price for unleaded gasoline was $3.15 per gallon Monday, down a penny from a week ago, according to AAA. The price is the highest for a Labor Day weekend in seven years and up sharply from the $2.23 per gallon price at this time last year.

Lipow stated that 12.5% of the nation’s refining capacities are being shut down in Baton Rouge and New Orleans.

Lipow said Exxon Mobil is currently shutting down its entire refining operation in Baton Rouge, responsible for 540,000 barrels a day. He said that two other Mississippi refineries are still operational. However, the area is currently under flood and tornado watch. Exxon Mobil stated that its Baton Rouge refinery wasn’t damaged, but that it will be closing down to stabilize them.

Kinder Morgan’s Plantation pipeline which transports gasoline throughout the southeast was operational Monday but its Baton Rouge terminal was not powered. Lipow stated that Plantation transports gasoline from Louisiana refineries while Colonial receives oil from Texas refineries.

Kilduff stated that no facilities appear to be suffering from any severe physical damage. This is good news for consumers. The industry is still watching to see when operations can be resumed and whether power outages will affect refineries.

Kilduff stated that “the electrical situation is still a mystery.” The possibility of gasoline prices rising if refineries are affected could lead to more disruptions.

Gasoline demand in the U.S. was a strong 9.57 million barrels a day, the Energy Department reported in its most recent weekly data. Weekly refined product demand reached another post-pandemic high and a level not seen since August 2019, according to TortoiseEcofin. It stated that the top three gasoline demand readings per week were in the past few weeks.

Kilduff stated that “this holiday weekend, there could have epic gasoline demand if the trends hold up.”

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Hi, you might find this article from Modern Campground interesting: Ida Affects Oil Refining And Production, Oil and Gasoline Prices To Increase! This is the link: https://moderncampground.com/usa/ida-affects-oil-refining-and-production-oil-and-gasoline-prices-to-increase/