Hurricane Ida shuts down Gulf oil production. What does that mean for gas prices?

Oil production has been mostly shut down in the Gulf of Mexico in response to Hurricane Ida, which could lead to rising fuel costs in the coming days, experts say.

The federal Bureau of Safety and Environmental Enforcement said Sunday that more than half of oil platforms in the Gulf were evacuated due to the devastating hurricane. Oil operators say about 95.65% of oil production had been halted as of Sunday, with 93.75% of gas production shut down, the federal agency said.

The facilities will be inspected after the storm passes to determine when production can resume. Shutting down gas production “is a standard procedure” during a hurricane for safety and environmental reasons, the agency said.

The Gulf of Mexico accounts for about 15% of U.S. crude oil production, the U.S. Energy Information Administration said this spring. This equates to more than 1.70 million barrels of oil per day.

Gas prices had been dropping recently following significant surges earlier in the year, but the affects from Ida may be seen at the pump. Patrick De Haan, Head of Petroleum Analysis at GasBuddy, said Sunday there is a 75% chance there will be a 5-cent increase in gas prices and a 60% chance prices increase by 10 cents.

But De Haan is confident gas prices will not skyrocket due to Ida.

“There is 0% chance that the national average rises to some of those apocalyptical figures,” he said. “No to a *national average* of $3.50. No to $4. No to $5. It’s just not in the cards.”

The national average for gas as of Monday morning was $3.15 per gallon, according to AAA.

Phil Flynn, market analyst with Price Futures Group, also expects a 5-to-10-cent increase in gas prices, but notes to Fox Business that his estimate may be a best-case scenario. He said flooding and power outages could create a “nightmare” scenario.

“We also have to be a little bit concerned about oil platforms,” Flynn said. “Even as they are hunkered down, the type of storm could do some longer-term damage to oil rigs and platforms.”

Gasoline production in the Gulf could be shut down for up to a week, one expert told MarketWatch. But a potential spike in gas prices will likely be short term, he added.

A spokesman for AAA said a surge as high as 20 cents per gallon is not out of the question, as nine refineries were in Ida’s forecast track.

“Where gas prices go from here will depend on the extent of the damage and how long it will take for fuel production and transportation lines to return to normal,” AAA spokesman Mark Jenkins said in a statement.

This story was originally published August 30, 2021 at 8:11 AM with the headline "Hurricane Ida shuts down Gulf oil production. What does that mean for gas prices?."