Gulf Coast energy forecast: uneasy

Sam Eaton Jun 1, 2006

KAI RYSSDAL: Ray Nagin was sworn in for a second term as mayor of New Orleans today. Coincidentally, today is also the official start of hurricane season. There are parties in New Orleans for the mayor, but today is nothing to celebrate for the rest of the Gulf Coast. Residents there are facing the prospect of more storms this year and the rest of the country won’t get off so easy, either. Remember gas prices last September? From the Marketplace Sustainability Desk Sam Eaton has a look at the energy infrastructure down in the gulf.

SAM EATON: Port Fourchon, Louisiana can feel like the end of the earth. But when it comes to the US energy supply this soggy Gulf Coast outpost on the Mississippi delta is at the heart of the action.

TED FALFOUT: This port plays some key role in supporting about 16-18 percent of the entire country’s oil supply.

That’s port director Ted Falgout. He says Port Fourchon not only serves as a key transfer point for more than $100 million of Gulf oil and foreign crude a day. It’s also the base of operations for repairing offshore oil and gas platforms damaged by hurricanes Katrina and Rita.

FALGOUT: On any given day we’ll have in excess of 250 large vessels a day coming into this port . . . a thousand trucks a day bringing every widget and gadget necessary. Six thousand people flying out of here by helicopter to offshore locations and back. So it’s a busy center of activity.

Despite all this activity, Falgout says there’s still a lot more work to be done. He says nearly a quarter of the 4,000 offshore oil rigs in the Gulf have yet to come back online.

FALGOUT: When you’re not back recuperated from the last blow, it’s kind of hard to get up and fight your way out of this one. If this area gets impacted even moderately, you’re going to see some unprecedented energy prices and perhaps shortages.

That’s a prediction that worries David Dismukes of Louisana State University’s Center for Energy Studies. The National Oceanic and Atmospheric Administration predicts 13 to 16 storms this season, with as many as 10 expected to become hurricanes. Dismukes says if any of those even threaten to come into the Gulf the whole system will shut down for one simple reason:

DAVID DISMUKES: A lot of this infrastructure and production is serviced by people. And people are in these tenuous areas throughout coastal Mississippi and Louisiana right now. Many are still living in trailers. Many will have to evacuate for events as minor as a tropical storm, which is events that we don’t usually evacuate for around here.

He says every evacuation means two or three days of disrupted oil supplies from the gulf. And that’s when nothing’s been damaged. Dismukes says combine that with $70 crude oil before the hurricane season even begins and this summer isn’t looking very good for oil prices.

DISMUKES: That’s considerably higher than where we were this time last year, around, say, $55 a barrel. So we’re already, if you think of this kind of snowballing effect, we’re already ratcheted up about $20 a barrel.

Given this scenario he says spikes as high as $85 a barrel are likely. But if the Gulf Coast gets another hurricane the size of Katrina or Rita this summer, all bets are off. Dismukes says in the wake of rising energy prices the US economy has shown surprising resiliency. The hope along the Gulf Coast is that this year’s hurricane season won’t be the one that pushes it over the edge.

In Port Fourchon, Louisiana I’m Sam Eaton for Marketplace.

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