NEW YORK – The energy industry braced Wednesday for catastrophic storm surges and winds as Hurricane Laura cut a dangerous path toward the coastlines of Texas and Louisiana.
Oil and gas producers evacuated platforms and rigs in the Gulf of Mexico and companies were shutting down refineries in the storm's path. Many had already done so while they were preparing for Tropical Storm Marco. Liquified natural gas facilities also were closing, and utilities braced for downed power lines and blackouts.
“These hurricanes, they can attack the entire energy infrastructure," said Jim Burkhard, head of IHS Markit research for crude oil markets. “And it’s not just a refinery being shut down, but if a pipeline gets shut down, or the electrical grid gets damaged, it shows how integrated all these systems are: pipelines, refineries, electricity. And it’s that aggregate damage that can be so challenging to overcome.”
The oil industry was already hammered since the start of the year, struggling with low prices after the coronavirus decimated demand. At the same time, OPEC was flooding the market with crude, aiming — with success — to put American oil producers out of business.
Oil prices have recovered somewhat, but are still well below what most producers need to stay in business. Benchmark U.S. crude was selling for about $43 a barrel Wednesday, while gasoline was selling for about $2.20 a gallon, according to AAA. This year, 60 oil and gas companies filed for bankruptcy protection, according to law firm Haynes and Boone.
Experts say it’s unlikely that the U.S. will suffer from major oil or gasoline shortages due to the hurricane, as other regions fill in the gaps or turn to stored oil. But with higher demand that typically comes with summer, there could be some disruption.
“Inventories have been getting tighter through the summer,” said Peter McNally, global sector lead at Third Bridge, an investment research firm. “There is a buffer, but we still have a couple weeks left in the summer of higher demand, so we could see the surplus come off pretty quickly.”