Ed Crooks, Vice-Chair, Americas, Wood Mackenzie

At the beginning of the 20th century, a hurricane remade the industrial landscape of the US. The great storm that hit Galveston in 1900, generally described as the worst natural disaster in US history, is estimated to have killed up to 12,000 people. Its impact on the port of Galveston was so devastating that it encouraged businesses to shift to the greater safety of Houston, 40 miles inland. It was one of the factors driving investment locations as the oil industry of Texas began to boom in the early 1900s.

Today, the refineries and petrochemical plants along the Gulf of Mexico coast are not going anywhere, despite their vulnerability to hurricanes. No-one is going to build new facilities on greenfield sites in the US, and the advantages of being near both the region’s oil and gas reserves and its accumulated port and pipeline infrastructure far outweigh the costs of storm damage and disruption. Hurricanes are an unavoidable risk.  

Hurricane Ida, which made landfall in Louisiana on August 29, has been one of the most disruptive in recent years, with a significant impact on both oil production and on refining. This aerial photo of Phillips 66’s Alliance Refinery, near Belle Chasse south of New Orleans, shows the extent of the flooding.

At the time of writing, about 1.5 million barrels per day of oil production in the Gulf of Mexico and 1.7 million b/d of refining capacity are still offline. That lost output is in line with the impact of other hurricanes, but the recovery this time has been slower, and the storm’s effects are expected to last longer.

Upstream, production was running at about 500,000 b/d this week, compared to about 2 million b/d before Ida hit, Wood Mackenzie’s short-term oil market service showed. That production is well below the rates achieved at the equivalent time after hurricanes Laura and Delta last year. Shell reported that its West Delta 143 facility, a transfer station for production from the Mars, Olympus and Ursa platforms, which normally transports about 200,000 b/d of oil, had been damaged. Port Fourchon, the largest base in the US for supporting the offshore industry, suffered severe damage, and helicopter facilities that serve offshore platforms were put out of action. 

Downstream, flooding and power outages continued to affect operations at refineries in Louisiana this week. Hurricane-related refinery outages can last anywhere from a few days to a few months, and Wood Mackenzie analysts expect some of the disruption to last at least another week. 

Crude prices surged in late August as Ida approached the US, rebounding from their dip earlier in the month, and they have held on to those gains, with WTI trading on Thursday at a little under $70 a barrel and Brent a little under $73. Wholesale gasoline prices in New York Harbor also rose sharply last month, although they have since given up some of that rise.  

The sixth Assessment Report on climate science from the Intergovernmental Panel on Climate Change, published last month, noted that scientists had low confidence in identifying any long-term trends in cyclone frequency worldwide.

However, they have high confidence in saying that global warming has been associated with heavier rainfall when storms form, and they expect that globally, peak wind speeds will increase with rising global temperatures. Hurricane risk may have been always present, but the nature of that risk appears to be changing. 

The resilience of EVs put to the test 

One of the issues in the aftermath of Ida has been the resilience of electric vehicles compared to internal combustion engine vehicles at a time of widespread power outages. By the middle of this week, hundreds of thousands of customers in Louisiana were still without power, particularly to the north and southwest of New Orleans. EV owners who fully charged their vehicles before Ida hit can use them, but they will have shorter range than those with ICE vehicles who filled their tanks.

Anyone who is reliant on public stations for charging is likely to face particular difficulties, says Wood Mackenzie’s Isaac Maze-Rothstein: “That is a tough situation.” Elon Musk of Tesla highlighted this issue as a concern for EVs back in 2019, announcing a plan to add storage to Supercharger stations to provide backup power when the grid went down, but that initiative was focused only on California.

Of course, gasoline and diesel supplies have also been severely disrupted by Ida. More than 55% of the fuel stations in New Orleans had no gasoline on Wednesday, according to GasBuddy, the consumer information service. But storing liquid fuels for emergencies is relatively straightforward. If the US vehicle market shifts massively towards EVs, as the manufacturers plan, the question of building in greater resilience in the event of a disaster will have to be addressed. Solutions such as microgrids and distributed energy resources to provide power when the grid goes down will become even more important.

Meanwhile, the outages following Ida have also underlined the value of EVs as sources of backup power. An electric Ford F-150 Lightning, for example can provide 9.6 kilowatts of output, and if fully charged can cover the average US household’s daily consumption of 30 kilowatt hours for three days. If you can afford the $40,000-plus price, and can add modify your home to add a transfer switch, it could look like a very attractive solution in a crisis.

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