Refiners including Valero Energy Corp. and Marathon Petroleum Corp. had already shut about 12% of U.S. oil-processing capacity as a precaution ahead of the Category 4 storm, which packed stronger winds than Katrina in 2005 as it made landfall. Colonial Pipeline Co., the operator of the largest fuel distribution system from the refining centers in Texas and Louisiana to customers throughout the eastern U.S., said Sunday it had idled its main pipelines.
Gasoline prices in the southeast U.S. could climb heading into the end of summer if refineries suffer extensive damage or can’t get power and are forced to stay shut for an extended period, adding to the price inflation hitting Americans. Traders in Europe have already been preparing to fill any gap in supplies available at New York Harbor, provisionally chartering tankers. Still, those would take as much as two weeks to cross the Atlantic.
“For a Category 4, you could be looking at four to six weeks or more of downtime for the refineries,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Both crude oil and gasoline have been hit by volatile trading this month as investors weighed the challenge to consumption posed by the delta variant, which spurred speculation the Organization of Petroleum Exporting Countries and its allies may pull back from a plan to add supplies. Following last week’s surge, coupled with the added lift to prices from Ida’s fall-out, the producers’ alliance is expected to go ahead with an increase when it meets on Sept. 1.
Ida, which came ashore about 60 miles south of New Orleans, drove up ocean levels as much as 16 feet (4.9 meters). The hurricane’s 150-mile-per-hour winds tie Louisiana’s record set by Laura in 2020 and a 19th century storm. As the storm neared, producers in the Gulf of Mexico shut in 1.74 million barrels a day of crude output, about 15% of the nation’s total.