20080901 gulf refinery 18
An oil tanker is docked at the ConocoPhillips Alliance Refinery in Belle Chasse, La., last June. The refinery, located in Plaquemines Parish, processes about 247,000 barrels of crude oil per day. - 


TESS VIGELAND: Despite Gustav's lashing of one of the country's main oil and gas producing regions, crude oil futures fell 4 percent in special electronic trading on the NYMEX today. Prices hit their lowest level in more than four months.

Marketplace's Dan Grech reports on the surprising optimism in the energy markets.

DAN GRECH: Hurricanes Katrina and Rita devastated U.S. oil infrastructure in 2005. Barbara Shook with the Energy Intelligence Group says the industry learned its lesson. It spent the past three years upgrading its offshore rigs to withstand a storm like Hurricane Gustav.

BARBARA SHOOK: What we've been hearing is that the offshore facilities have suffered very little damage. They've all been upgraded, plus Gustav is not as strong as those storms were.

Jim Rouiller is a senior energy meteorologist at private forecaster Planalytics. He says the market is jumping the gun.

Jim Rouiller: Though I sure hope the production region dodged a bullet, as what many market players have been saying this morning, I think this mindset or feeling may be a bit premature.

Exxon Mobil, Royal Dutch Shell and other energy firms won't know the full extent of the damage until they return to the rigs starting tomorrow.

Rouiller said Gustav ran through some key energy hubs, including Port Fourchon and the Louisiana Offshore Oil Port, or LOOP.

ROUILLER: The LOOP terminal took a direct hit. And as we know, the LOOP terminal basically provides an artery for gas flow right up to Chicago.

There's still another hurdle to cross, says energy expert Jorge Pinon with the University of Miami.

JORGE PINON: The weakest link is the refinery capacity. To process crude oil into refined products like gasoline, diesel and jet fuel, which is really what the markets demand.

Gustav is now making its way through a region that is home to nearly half of the nation's refining capacity.

I'm Dan Grech for Marketplace.