With all eyes focused squarely on the financial storms enveloping Wall Street, the impact from Hurricane Ike slipped quickly and quietly off the front pages.
Oil prices have fallen briskly so far this week despite some significant short-term disruptions to energy production and transportation throughout the Gulf region. With oil platforms, gasoline refineries, and other key facilities all affected by the hurricane, it's no wonder this storm put the "ike" in the phrase "gasoline price spike."
Missing out on some favorable price conditions, refiners like Valero (NYSE: VLO ) and integrated producers like ConocoPhillips (NYSE: COP ) have been forced to halt operations at some key facilities. Facing temporary supply disruptions, gasoline prices have surged in Texas and risen across the country in recent days. The 38% decline in crude prices from more than $145 per barrel in July to just over $90 today would otherwise have created a long-awaited opportunity to bolster margins.
The tally of halted operations as of Monday was extensive. Fourteen refineries totaling more than 3.5 million barrels per day of capacity were offline, along with 27 natural-gas processing plants with a combined capacity of 13.85 billion cubic feet per day. Other elements of infrastructure, such as port facilities and pipeline pumping stations, were also still lacking power.
Personnel from 591 production platforms and 92 offshore oil rigs had been evacuated ahead of the storm, and at least 10 platforms were destroyed. One semisubmersible rig belonging to Transocean (NYSE: RIG ) apparently drifted about two miles, while at least one of Diamond Offshore's (NYSE: DO ) rigs lost its drilling derrick.
Making matters worse, much of the region's infrastructure never had a chance to get back to full strength after Hurricane Gustav came ashore in Louisiana on Sept. 1. Several refineries and pipelines, including the important Colonial pipeline, were at least running at partial capacity as of yesterday.
Well after all the damage-assessment reports have been filed, the industry will be working hard to recover quickly from Hurricane Ike's impact. Still, with an estimated 24 million barrels per day of refining capacity lost since Gustav made landfall, refiners operating chiefly outside the affected region may see a comparative boost for the present quarter. In the short term, Gulf-exposed Valero may have lost a bit of that competitive edge over names like Holly (NYSE: HOC ) , Western Refining (NYSE: WNR ) , and Tesoro (NYSE: TSO ) .
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