Hurricane Michael strikes, but oil and gasoline infrastructure poised to weather the storm

Hurricane Michael strengthened into a powerful Category 4 storm ahead of its landfall in the Florida panhandle, but its path creates few concerns for the flow of oil and gasoline in the area.

The storm is blowing east of the U.S. Gulf Coast refining hub in Louisiana and Texas, sparing the area the devastating blow dealt by Hurricane Harvey last year. Meanwhile, Hurricane Michael has remained on a relatively steady course, allowing the state’s fuel distributors to plan for the storm’s aftermath.

Michael’s biggest energy impact to date has been on offshore oil and gas facilities in the Gulf of Mexico, where companies have evacuated crews from 86 platforms and rigs. Nearly 40 percent of Gulf of Mexico oil production and roughly 28 percent of natural gas ouput has been shut down, the U.S. Bureau of Safety and Environmental Enforcement estimates.

However, barring significant damage to those facilities, output typically starts up quickly.

The market’s expectation that Gulf infrastructure will emerge from the storm unscathed in part explains why oil prices are down about 2 percent after gaining roughly 1 percent on Tuesday, said John Kilduff, founding partner at energy hedge fund Again Capital.

U.S. gasoline futures tumbled more than 2 percent, to about $2.03 per gallon.

“We really dodged a bullet here,” Kilduff said. “Everything lies literally to the west of the storm. There were fears that if it got bigger, or if it stumbled around, it could be an issue.”

The temporary loss of Gulf oil output would typically lead to a drop in weekly U.S. crude stockpiles, which tends to push up oil prices.

However, the Louisiana Offshore Oil Port, which processes much of the nation’s growing crude exports, stopped operations at its marine terminal on Tuesday. That could cause a temporary dip in export activity, resulting in an offsetting rise in crude inventories, Kilduff noted.

Some Florida gas stations were out of fuel or had limited options, local news outlets reported.

Short-term shortages at the pump are typical as hurricanes bear down on an area and drivers fill up their tanks as a precaution. Those pre-storm supply crunches are usually alleviated by a subsequent drop in demand for fuel, since drivers often stay off the road during and after hurricanes.

The uncertain path of last year’s Hurricane Irma sent Floridians across the state scrambling to the gas pump, making it difficult to resupply the stations. But Hurricane Michael is not causing the same statewide run on gasoline because it remained on track for landfall on the panhandle.

“We’re not having any problems,” said Ned Bowman, executive director of the Florida Petroleum Marketers Association. “We’ve got a lot of things closed and evacuated.”

Major fuel terminals in Bainbridge, Georgia; Jacksonville, Florida; and Mobil, Alabama, remain in operation, according to Bowman. That is critical to keeping fuel flowing into Florida, which gets much of its gasoline by ship from the Gulf Coast.

The U.S. Coast Guard declared Condition Yankee at several ports in the eastern Gulf of Mexico, shutting them to incoming or outgoing traffic.

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