Anyone planning to travel for Labor Day weekend can expect to pay more for gasoline. On top of Biden administration policies that have caused gas costs to rise, Hurricane Ida has shut down more than 95 percent of oil production in the Gulf of Mexico.
The federal Bureau of Safety and Environmental Enforcement confirmed the stop in oil production, with firms suspending 1.74 million barrels per day in oil production in gulf.
“Production platforms are the structures located offshore from which oil and gas are produced,” the bureau said. “Unlike drilling rigs, which typically move from location to location, production facilities remain in the same location throughout a project’s duration.”
The issue is that the Gulf Coast is home to some of America’s largest oil refineries, and the hurricane’s ferocious winds make it nearly impossible to operate the facilities. The oil companies and refineries typically shut down production during such times, as they did this time with Ida. That makes sense, given that more than one million people in the area of landfall are now without power.
The cut in production of gas means three things, according to “Forbes”:
- First, people will still want to buy gasoline to commute to work, but the refineries won’t be making any gas during the storm. A lower supply of gas with essentially unchanged demand will help lift fuel prices.
- Second, refineries in the affected area will not be buying oil to make into gasoline. That means there will be a drop in demand for oil. Part of that will offset the reduced supply from oil wells that got shut down during the hurricane’s approach. This slight offset helps explain why the percentage decrease in oil prices was modest compared to the proportionate increase in gasoline prices.
- Third, these hurricane-induced price moves likely will reverse as the storm dissipates. At that point refineries will start operating once again, depending on the need for repairs.
Gasoline and other fuel costs have risen by almost 100% since mid-January. Biden was mocked in early July for asserting that his policies saved 16 cents per Fourth of July meals.
–Alan Goforth | Metro Voice