Oil and gas producers evacuated platforms and rigs in the Gulf of Mexico and companies shut down refineries in the storm's path. Many had already done so while preparing for Tropical Storm Marco. Utilities face downed power lines and blackouts.
“These hurricanes, they can attack the entire energy infrastructure," said Jim Burkhard, head of IHS Markit research for crude oil markets. “And it’s not just a refinery being shut down, but if a pipeline gets shut down, or the electrical grid gets damaged, it shows how integrated all these systems are: pipelines, refineries, electricity. And it’s that aggregate damage that can be so challenging to overcome.”
The oil industry has been hammered since the start of the year, struggling with low prices after the coronavirus decimated demand. At the same time, OPEC was flooding the market with crude, aiming — with success — to put American oil producers out of business.
Oil prices have recovered somewhat, but are still well below what most producers need to stay in business. Benchmark U.S. crude was selling for about $43 a barrel Wednesday, while gasoline was selling for about $2.23 a gallon, according to AAA. This year, 60 oil and gas companies have filed for bankruptcy protection, according to law firm Haynes and Boone.
The National Hurricane Center said the storm made landfall at 1 a.m. CDT on Thursday near Cameron, a 400-person community about 30 miles (48 kilometers) east of the Texas border. It had maximum sustained winds of 150 mph (240 kph), making it the most powerful hurricane to strike the U.S. so far this year.
Forecasters warned the strong winds could rip apart buildings, level trees and toss vehicles like toys.
Experts say it’s unlikely that the U.S. will suffer from major oil or gasoline shortages due to the hurricane, as other regions fill in the gaps or turn to stored oil. But with high summer demand, there could be some disruptions.
“Inventories have been getting tighter through the summer,” said Peter McNally, global sector lead at Third Bridge, an investment research firm. “There is a buffer, but we still have a couple weeks left in the summer of higher demand, so we could see the surplus come off pretty quickly.”