A hurricane barreling toward the southeastern United States could threaten Gulf Coast refineries and push fuel prices even higher.
Refineries that process roughly 500,000 barrels of oil a day lie within Hurricane Isaias’ potential damage zone. While the extent of any disruption will depend on the storm’s intensity, offshore oil producers have already suspended operations as a precaution. Shell, Chevron, and BP have evacuated personnel, taking about 1.3 million barrels of daily oil production offline.
Forecasters expect the storm to make landfall east of New Orleans, potentially sparing major refineries a direct hit, though wind damage and severe flooding remain key risks. Alabama, Mississippi, and the Florida Panhandle will likely bear the brunt of the storm, putting Chevron’s refinery in Pascagoula, Mississippi; Vertex Energy’s refinery in Mobile, Alabama; and Hunt Refining Company’s refinery in Tuscaloosa, Alabama, at risk, according to Bloomberg. Together, those facilities process roughly half a million barrels of oil a day.
The storm could also delay oil tankers traveling across the Gulf with oil for refineries, causing further supply chain constraints.
Hurricane Isaias is a Category 3 hurricane with winds reaching 120 mph, CBS News reported. Forecasters expect it to make landfall late Friday night.
Robert Yawger, director of energy futures at Mizuho Securities, told CNN the hurricane could hardly come at a worse time. Hurricane Isaias “could be a gigantic event,” he said. “It’s the worst time something like this could happen in 25 years.”
U.S. refineries are already running at maximum capacity to offset oil disruptions caused by the war with Iran. The nation’s emergency oil reserve is at a roughly 40-year low, with inventories approaching levels last seen when the reserve was still being built. The U.S. Strategic Petroleum Reserve typically holds between 500 million and 600 million barrels, but now holds about 280 million barrels.
With depleted oil reserves to fall back on, further supply disruptions could push fuel prices higher. As of Friday, the national average price of gasoline was $4.37 per gallon, while diesel averaged $6.28, according to AAA. Last month, diesel hit a record high of $6.40, The Daily Wire reported, before climbing further to $6.53.
While the situation in Iran is improving, fuel prices remain elevated as diesel shipments remain disrupted and countries work to replenish their oil inventories, The Daily Wire reported. G-7 countries announced last week that they will release 100 million barrels of oil from emergency reserves over the next four months to help with prices.
One analyst estimated the move could reduce diesel prices by 25 cents per gallon.
