Hurricane Ike Idles Texas Oil Industry, Threatens Floods

September 12, 2008

Powerful Hurricane Ike bore down on the heart of the U.S. energy sector in Texas Friday, leaving most production idled and threatening a fifth of the nation’s refining capacity with howling winds and a possible 20-foot (6-meter) wall of water.

Forecasters said the storm, packing winds of more than 100 mph (160 kph), would likely hit near Houston early Saturday, after oil companies shut down about 25 percent of the nation’s crude oil production and nearly 22 percent of its 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, meteorologist with private weather forecaster Planalytics. “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 hurricanes Katrina and Rita ripped through the region and devastated swaths of the Gulf Coast.

The threat from Ike pushed oil prices up a dollar Friday and triggered a spike in wholesale gasoline prices along the Gulf Coast that experts said could filter to the pumps in the coming days.

Already, some 13 refineries in Texas were shut down as a precaution ahead of Ike, while another one in Louisiana was also shut in a slow recovery from Hurricane Gustav earlier in the month.

Together, the refineries account for 3.8 million barrels per day of gasoline, diesel and other fuel production, or about 22 percent of the nation’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 latest data from the Minerals Management Service.

The Gulf is home to a quarter of U.S. crude oil production and 15 percent of U.S. natural gas production.

But offshore production was expected to recover fairly quickly, as Ike veered just south and west enough to reduce the risk of damage to platforms.

(Reporting by Bruce Nichols and Erwin Seba in Houston, Janet McGurty and Richard Valdmanis in New York, editing by Matthew Lewis)

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