Oil industry braces

The energy industry readies for storm in Texas, Louisiana

NEW YORK — The energy industry braced Wednesday for catastrophic storm surges and winds as Hurricane Laura cuts a dangerous path toward the coastlines of Texas and Louisiana.

Oil and gas producers have evacuated platforms and rigs in the Gulf of Mexico and companies are shutting down refineries in the storm’s path. Many had already done so while they were preparing for Tropical Storm Marco. Utilities are bracing 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 f looding 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.”

Nearly half of the oil and gas platforms in the Gulf of Mexico — almost 300 — were evacuated by Wednesday, along with most of the offshore rigs. Producers shut in 84% of the oil produced in the region, taking about 1.6 million barrels per day off the market. The Gulf region usually produces about 15% of the oil in the U.S. Producers also shut in about 61% of the natural gas produced in the Gulf.

More than half of U.S. refining capacity is built along the Gulf Coast, where the storm is heading.