Shell and Chevron have shut down production at several platforms in the Gulf of Mexico due to the forecast of Tropical Storm Isaias, which may develop into a hurricane. Shell has evacuated all its personnel from five platforms including Mars, Olympus, Ursa, Vito, and Appomattox, and has ceased production activities in these areas.
Impact on Oil Production
Chevron has similarly acted on four offshore platforms in the Gulf of Mexico while keeping five other platforms operational. According to initial reports, BP is also in the process of evacuating its personnel from offshore platforms in the Gulf of Mexico. The storm Isaias is expected to make landfall in the United States on Saturday, which could pose dangerous impacts on the northern Gulf Coast.
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Economic Consequences and Oil Prices
Offshore fields in the Gulf of Mexico account for about 15 percent of total U.S. oil production and 5 percent of total natural gas production. In the event of a storm, there are increased risks for refineries along the Gulf Coast. Currently, U.S. refineries are operating at maximum capacity to produce fuel in response to a global fuel shortage. This shortage has driven refining margins and retail fuel prices to their highest levels, and any disruption in refining activities in the United States could exacerbate price issues.
However, news of platform shutdowns may also contribute to an increase in crude oil prices, especially in a week where we have seen an uptick in Iranian attacks on tankers in the Persian Gulf. As Isaias is expected to develop into a hurricane, it is essential to pay attention to its impacts on the oil and gas market.
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