September 14, 2008

Hurricane Hits U.S. Oil Production

Hurricane Ike bore down on the heart of the U.S. energy industry Friday, leaving most production idled and threatening a fifth of the nation's refining capacity with howling winds and a wall of high water.

Forecasters expected the storm, packing strong winds, to hit near Houston early Saturday. Oil companies shut down about 25 percent of the U.S. crude oil production and nearly 22 percent of the refined fuel production as a precaution.

"Hurricane Ike is a gigantic Category 2 monster and is likely to generate a massive and particularly destructive storm surge at key refinery centers," said Jim Rouiller, a meteorologist with Planalytics, a private weather forecasting service. "Close to 20 percent of the U.S. refining capability could be lost for a long period of time."

The last time hurricanes shut down as much crude oil and refining production in the United States was in 2005, when the hurricanes Katrina and Rita devastated swaths of the coast of the Gulf of Mexico.

The threat from Ike pushed oil prices up a dollar a barrel Friday and triggered a spike in wholesale gasoline prices along the coast that experts said could filter through to the retail level.

Already, a dozen refineries in Texas have been shut as a precaution ahead of Ike, while another one in Louisiana was also shut in a slow recovery from Hurricane Gustav.

Together, the refineries account for 3.8 million barrels per day of gasoline, diesel and other fuel, or about 22 percent of the U.S. capacity.

Offshore, oil companies reeling from Hurricane Gustav have shut nearly 97 percent of their Gulf of Mexico oil production and more than 93 percent of their natural gas output, according to the Minerals Management Service.

Originally published by Reuters.

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