Oil markets are getting a lift this morning as Hurricane Ian runs through the Gulf of Mexico, shutting in some offshore oil rigs for the first time this hurricane season. Chevron and BP have announced evacuations at a few oil rigs, which collectively can produce around 485 thousand barrels per day – roughly 4% of total US production. Outages are not expected to last long, but even a few days could mean one to two million fewer barrels making their way to US crude inventories.
Hurricane Ian likely won’t have a major long-term impact on fueling infrastructure. The storm will primarily affect western Florida, which does not have any refining capacity and does not connect to the major fuel pipelines that connect other parts of the country. Because of Florida’s distance from key refining hub, Hurricane Ian probably will not cause a significant increase in fuel prices once oil rigs return to operations.
When hurricanes hit locations that are not critical infrastructure areas, they tend to have a more bearish effect – most private and commercial activities cease as the storm passes, meaning less fuel consumption. As a state, Florida consumes 21 million gallons of gasoline and roughly 7 million gallons of diesel per day. If cars and trucks are temporarily pulled off the road, that leaves more fuel in inventories after the storm. Of course, with barges now cut off from refueling Tampa, the excess fuel will be stored at Gulf Coast hubs, not in Florida, until marine shipments can resume.
