WASHINGTON — Hurricane Gustav shut down at least at least 25 percent of the nation's oil production and closed down the nation's main petroleum import facilities, but initial reports Monday suggested the storm spared the Gulf Coast significant damage.
The big oil companies were in the process of assessing the damage on Tuesday afternoon, but as anecdotal evidence mounted that the Category 2 hurricane spared the region, oil prices plunged in trading on the New York Mercantile Exchange.
Crude oil settled down $5.75 to $109.71 a barrel after falling to $105, a five-month low, in early trading Tuesday.
If there are no ugly surprises like damage to a major offshore production platform, oil could be poised to fall toward $100 a barrel as Labor Day marks the close of the peak summer driving period. For motorists, that could spell relief at the pumps by mid-September.
"Assuming there is no significant damage to the platforms or undersea lines then production would resume very quickly," Kevin Kolevar, the Department of Energy's hurricane point man, told reporters in Washington in an afternoon news conference Monday.
Gustav forced the shut down of 1.3 million barrels per day of oil production in the Gulf of Mexico. That complete shutdown amounted to a full quarter of U.S. oil production and about 15 percent of natural gas production nationwide.
Onshore, where the Department of Energy said 33 oil refineries were potentially affected by Gustav — with the combined capacity to refine 7.5 million barrels per day — only 12 were forced to completely shut down. That was about 28 percent of the Gulf region's refining capacity, while another 44 percent of the region's refining capacity was operating on reduced production runs.
Private inventories of oil in storage in the Gulf Coast and elsewhere in the United States leave the nation with adequate short-term supplies. The Strategic Petroleum Reserve, oil held in underground caverns in Louisiana and Texas, is almost completely filled to 707 million barrels of oil. It too could be tapped if there was significant damage to offshore production.
"We are exceptionally well positioned to deal with temporary disruptions," Kolevar said, adding that as of late Monday that the main pipelines carrying petroleum products to the Carolinas and the U.S. southeast — operated by Colonial Pipeline — were operational and apparently undamaged.
Centennial Pipeline's line running from Beaumont, Texas, to Illinois was not operating Monday afternoon and the DOE sought more information as to why. The pipeline is half owned by the Marathon Petroleum Co., and it did not discuss the outage on its emergency response website.
The oil industry Web site Rigzone.com said Monday that offshore oil infrastructure in the Gulf is likely to have taken Gustav's punch and remained standing, unlike three years ago during the twin Category 5 storms of Katrina and Rita.
"Given that Gustav was moving 60 percent to 100 percent faster than Rita, the offshore infrastructure in its path has been exposed to significantly less hurricane force winds because the storm moved past so quickly," the industry website said. "Gustav's rapid path ... is good news for drilling contractors and operators with assets in the way of the storm since any given location only experienced hurricane force winds for a maximum of about nine hours for locations directly in the path of the storm eye (140 mile diameter of hurricane force winds moving at 16 mph)."