One of the major causes of gas prices spiking after Katrina was the uncertainty of oil supply from the Gulf.
Many of the facilities were “shut-in” after the storm due to possible damage and safety concerns. Now that inspections have begun, oil is beginning to flow again.
At the peak of “shut-in” production on August 30, over 95% of daily oil production and close to 88% of daily natural gas production was shut in for environmental and human safety reasons in the Gulf of Mexico.
As of last Friday, shut-in oil is slightly below 60% of daily production and shut-in natural gas is around 38% of daily production.
Of the roughly 4000 Outer Continental Shelf production facilities, 37 shallow water platforms were destroyed (which produced only about 1% of total production from that region). Four large deep water platforms, which accounted for around 10% of pre-storm federal offshore oil production, were extensively damaged and could take from three to six months to bring back on line. Some pipelines suffered damage that could take months to repair, while others have been inspected, tested, and brought back on line.
According to the Minerals Management Service: “Despite this damage, about 90 percent of Gulf oil production could return to the market in one month, if refineries, processing plants, pipelines and other onshore infrastructure are in operation to receive, prepare and transport it to the consumer.”
(Source: Congressional Joint Economic Committee).
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