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Hurricane Isaac Bears Down on New Orleans

Shortly after being officially declared a Category 1 Hurricane, Isaac hit the gulf coast this Wednesday. While most of the news coverage is fixed on comparisons to Hurricane Katrina and the Republican National Convention, the fact of the matter is that Isaac has wreaked havoc on the nation’s gas prices – even when it was only a tropical storm. Just yesterday we at Pumps posted that the storm had driven up prices 2.5% since the end of the week.

The US government already said that daily oil production in the Gulf would be cut by almost one fourth over the weekend, bringing national gas production down a total 8%. The most current updates indicate that Hurricane Isaac is both slowing down and becoming stronger, which will mean more serious damage to New Orleans and the surrounding area than some may have expected.

“Noting that the storm was moving west and threatening to grow more powerful, energy giant BP evacuated all its installations and temporarily halted production in the Gulf Sunday. Earlier, it had pulled workers from its massive Thunder Horse platform in the eastern Gulf.

Royal Dutch Shell is withdrawing all workers and suspending production in the eastern Gulf. It is pulling out all but essential personnel and cutting production in the central Gulf.

Apache Corp., a Houston oil services company, is withdrawing 750 workers and contractors from its installations in the eastern Gulf. It is also cutting production of oil and natural gas. Other energy companies have also been evacuating their platforms and rigs in the Gulf.

Murphy Oil Corp., based in El Dorado, Ark., said Sunday that it is pulling out all workers and suspending operations in the Gulf.

Overall, oil companies pulled workers off 39 (7 percent) of 596 production platforms and eight (11 percent) of 76 Gulf oil rigs, the U.S. Bureau of Safety and Environmental Enforcement reported Sunday.”

Given that Hurricane season officially lasts until the first day in November, Isaac serves as a powerful reminder of how unpredictable – yet inevitable – price shocks are in the energy markets.

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