Hurricane Isaias hits Florida: 72 per cent of Gulf oil production halted

Hurricane Isaias made landfall near Destin, Florida, as a Category 2 hurricane, causing flooding and power cuts. After making landfall, it weakened to a Category 1 storm, but warnings remain in place for storm surges, flash floods and further damage to infrastructure. Nearly 380,000 customers in Florida and over 210,000 in Alabama were without electricity in the first few hours following the storm’s passage.

The most immediate economic impact is on the energy sector. As a precautionary measure, companies have halted oil production in the Gulf of Mexico by around 1.5 million barrels a day – almost 72 per cent of the region’s total output – along with 59 per cent of gas production. The crews of 129 platforms have also been evacuated. The Gulf normally produces around 15 per cent of US crude oil.

The greatest risk, apart from the temporary shutdown of the platforms, now concerns the refineries and the electricity grid. The Associated Press highlights in particular the vulnerability of the facilities in Pascagoula, Mississippi, and Mobile, Alabama: power cuts or prolonged flooding could reduce the supply of fuel at a time when diesel stocks are already under pressure.

If the facilities do not sustain significant damage, offshore production could resume quickly and the impact on prices could remain limited. Longer disruptions at refineries, on the other hand, could put further pressure on petrol and diesel prices in an oil market already strained by international geopolitical crises.