National gas prices could see temporary uptick in Ida's wake
Gas prices across the country could see a temporary spike in the aftermath of Ida, which made landfall in Louisiana as a Category 4 hurricane on Sunday and forced the temporary closure of pipeline routes and energy industry infrastructure in the region.
While residents in the area are still reeling from Ida's fury and many customers could remain without power for weeks, an emotional New Orleans Mayor LaToya Cantrell on Monday said the city was spared from a "worst-case scenario" situation. "We did not have another Katrina," Cantrell said. "We should all be grateful."
As of Monday afternoon, some 94.6% of the current oil production in the Gulf of Mexico has been shut in, according to the Bureau of Safety and Environmental Enforcement (BSEE), the agency that oversees the offshore energy industry in the U.S. Moreover, the BSEE also estimates that approximately 93.57% of gas production in the Gulf of Mexico has been shut in.
"After the storm has passed, facilities will be inspected," the agency said Monday. "Once all standard checks have been completed, production from undamaged facilities will be brought back online immediately. Facilities sustaining damage may take longer to bring back online."
Operators of Colonial Pipeline, a major East Coast fuel conduit that made headlines earlier this year due to a high-profile ransomware attack, said Sunday that parts of the pipeline would be shut down as a "precautionary and routine safety measure." The company shut down Lines 1 and 2, which run from Texas to North Carolina.
On Monday, the company said that crews were assessing facilities and expects to return Lines 1 and 2 to service on Monday evening, pending successful completion of all restart protocols.
While the extent of the damage from the storm is still revealing itself, Patrick De Haan, the head of petroleum analysis at GasBuddy, said motorists across the country will likely see a temporary price hike at the pump soon.
"We don't really know yet how much damage occurred in these areas. Obviously there's a tremendous amount of flooding, and power loss is probably the biggest question," De Haan told ABC News on Monday.
"Having said that," he added, "I do believe there will be price impacts across most of the country. I would classify them as minor, I think the national average and could rise maybe 5 to as much as 15 cents a gallon from Ida over the next one to two weeks."
While oil prices are only up modestly (some 34 cents a barrel as of Monday), De Haan said it's not uncommon for the price of oil to go down in the aftermath of a storm, "simply because there's less demand from refineries that are shut down."
"Meanwhile, gasoline usually goes up in value because refineries aren't producing as much," he added.
Still, De Haan urged calm and said many of the "apocalyptic numbers" floating around online related to gas prices may be inaccurate.
"There's a lot of posts on social media suggesting that there's massive increases coming, but there aren't," he said, noting the possible exception of local price spikes in Louisiana due to supply challenges.
De Haan added that the pandemic has reduced gasoline demand, as many people are no longer commuting and the summer driving season is winding down, so there is a little more "breathing room" for price fluctuations.
"The price impact could grow as we understand and get more information from these damage assessments, but for now I think it's going to be relatively minor," he said.
Price increases are also expected to be temporary and will wane once the refineries and infrastructure get back online, he added. As for Colonial Pipeline, De Haan said this situation is vastly different from the multi-day shutdown earlier this year because, "it's an expected issue instead of an unexpected one."
The national gas price average on Monday was $3.15 a gallon, according to American Automobile Association data, only about 1 cent higher than the same time last week.
The AAA said the storm has likely taken about 13% of U.S. refining capacity offline. Spokesperson Jeanette McGee said in a statement Monday that it is too early to know the full impact of Ida's damage to the oil and gas industry, "but motorists regionally can expect price fluctuations leading into Labor Day weekend."
"Typically, a Category 4 storm could mean three plus weeks before refineries are back to normal operations, while offshore production is more likely to resume this week," McGee added.
