Hurricane Hangover, Shortages Ahead

Ike’s sudden left turn just before it made landfall meant that the 13 refineries in Houston escaped the brunt of the hurricane’s force. All are reporting they sustained no material damage and will begin the restart process as soon as power is restored. That could be a week to ten days before power is stable and another 2-3 days to restart. This suggests there could be a serious problem for refined products like gasoline and diesel.

As a result of hurricane Gustav and the refinery shutdowns in the Louisiana area the availability of refined products is already limited. Most of the refineries in Louisiana are back up and running but several are at reduced capacity because of a shortage of oil. The Louisiana Offshore Oil Port (LOOP) was down over a week for Gustav and most of last week due to Ike. Tankers were avoiding the gulf not knowing where Ike was headed. They should be unloading their cargo into the LOOP again this week.


Most of the 1.4 mbpd of gulf production has been offline for the last two weeks. That is roughly 14 million barrels that were not available for Louisiana refineries to use. Most of that production will be back online by the end of next week but there will still be a shortage of crude in that area for weeks to come.

The surge from Ike is threatening three refineries in the Lake Charles area on the Texas border. They were not initially seen as a hurricane risk but the size of Ike caused a surge peak farther west than expected. As of Sunday 16 refineries representing 25% of U.S. capacity were offline. Texas officials are saying it could take weeks to restore power.

Rightside Advisors