Almost 20% of America’s oil refining capacity was shut down as a direct result of Hurricane Ike smashing into the Gulf Coast, restricting oil supplies and prompting market analysts to predict a sudden rise in the price of a barrel of oil, with a knock-on effect of a $4 a gallon rise in gasoline from the pump to consumers.
At least 13 refineries scattered across Texas, including plants operated by ExxonMobil, Valero Energy and Royal Dutch Shell, shut down capacity to only producing 3.64 million barrels a day (bpd) as Ike approached.
As a result the Department of Energy has been forced into releasing 309,000 barrels from its strategic reserves.
It is not just motorists that will be feeling the effect of the hurricane season; insurers will find themselves digging into their coffers to cover the cost also.
Hurricane Ike could cost insurers in the region of $18-$22 billion.
The highest estimate came from the California-based Eqecat, who specialise in predicting effects of disasters.
AIR Worldwide, a Boston-based firm, said that Ike may have caused as much as $12 billion of insured losses on land, with an expected loss of $10 billion.
Despite differing estimates, both AIR and Eqecat agreed that the minimum cost of damage caused by the hurricane was $8 billion – a figure which would place Ike at being the fourth most-expensive storm in U.S. history.
Ike was the first hurricane to hit a major U.S. metropolitan area since Katrina struck New Orleans in 2005, costing insurers $41.1 billion.
U.S. President, George W. Bush, said that both federal and state authorities were watching for price gouging at the pumps and added that it was too early to determine the extent of the damage to U.S. energy infrastructure.
President Bush said: “It's a little early to fully assess where we stand, although I can say that one of the pipelines coming out of the Gulf Coast area is running.”
U.S. oil prices fell more than $2 – to a 6 month low, in a special Sunday trading session, as dealers anticipated a quick recovery of energy production despite trade volume being thin. It appears that the impact of Hurricane Ike has done little to reverse falling oil prices.
A barrel of oil is now trading at $99.17 after falling to as low as $98.55.
The New York Mercantile Exchange decided to open a special Sunday energy trading session due to increased trader interest about Hurricane Ike.
