U.S. Oil and Natural Gas Market Impacts

Prices NYMEX Futures Prices (for October delivery) 9/17/2008 Pre-Gustav 8/29/2008 change Week Ago 9/10/2008 Year Ago 9/17/2007   WTI Crude Oil ($/Bbl) 97.16 115.46 -18.30 102.58 80.57   Gasoline RBOB* (c/gal) 246.30 285.42 -39.12 266.16 204.42   Heating Oil (c/gal) 282.47 319.19 -36.72 290.24 222.87   Natural Gas ($/MMBtu) 7.91 7.94 -0.03 7.39 6.65 *RBOB = Reformulated Blendstock for Oxygenate Blending (RBOB), the base gasoline that needs to be blended with some type of oxygenate, now usually ethanol, to be turned into finished reformulated gasoline (RFG). Ethanol is not blended into the gasoline mixture until just before the gasoline is shipped to the retail stations. Petroleum As of 12:30 pm EDT (11:30 am CDT), September 17, the Minerals Management Service was reporting that 1.25 million barrels per day (or about 95 percent) of the federal portion of the Gulf of Mexico’s crude oil production was shut-in.  As of 9:00 am EDT (8:00 am CDT), September 17, the Department of Energy reported that there are 12 refineries in Texas and Louisiana that are shut down ahead of Hurricane Ike.  These 12 refineries have a total capacity of 3.0 million barrels per day (about 17 percent of U.S. operable capacity), and represent about 1.1 million barrels per day of gasoline output (about 12 percent of U.S. gasoline demand in September) and over 700,000 barrels per day of distillate fuel output (about 18 percent of U.S. demand in September), based on recent historical data.  So far, since refineries first shut down before Hurricane Gustav, close to 32 million barrels of products have not been produced, including nearly 15 million barrels of gasoline and over 10 million barrels of distillate fuel. This does not include reduced production from refineries that have reduced runs at various times during Hurricanes Gustav or Ike.  As of September 16, 9 refineries were running at a reduced rate.  As of September 16, the Colonial and Plantation product pipelines continue to operate at reduced rates.  Both of these are major product pipelines going from the Gulf Coast to the East Coast. As of the close of trading on September 17, oil prices remained well below pre-Hurricane Gustav levels.  Compared to prices before Hurricane Gustav, crude oil for October delivery was $18 per barrel lower, while gasoline (RBOB) and heating oil were about 39 cents and 37 cents per gallon lower, respectively. Natural Gas As of 12:30 pm EDT (11:30 am CDT), September 17, the Minerals Management Service was reporting that over 6 billion cubic feet per day (or over 80 percent) of the federal portion of the Gulf of Mexico’s natural gas production was shut-in.  The Department of Energy (DOE) reported that as of 12:00 pm EDT September 16, many natural gas pipelines impacted by Ike and Gustav continue to inspect and assess damage to their facilities. Certain portions of pipeline segments have commenced gas flow or are ready to resume flow once third-party facilities complete inspections. Reports of flood damage and lack of power continue to delay the return of facilities and in some cases it is likely to take several weeks for repairs and clean up in order to restart. The Independence Hub platform, located about 150 miles offshore Louisiana in Mississippi Canyon reported gas flow of almost 900 million cubic feet on September 16, which is an increase of approximately 200 million cubic feet from September 15, 2008. As of 4 pm EDT September 16, the Sabine Pipe Line, LLC reported that the force majeure has been lifted for some additional points along its system. Compression at the Henry Hub complex remains unavailable at this time and Sabine advises its customers that gas flow through the system must be received at sufficient pressure. As of 8:00 am EDT, September 17, the Energy Information Administration (EIA) has confirmed that 19 plants remain shut down which includes those plants still impacted from Gustav, totaling an operating capacity of 9.42 billion cubic feet per day (approximately 54 percent of the capacity in Hurricane Ike’s path). In addition, EIA reports that 13 plants have resumed operations at reduced or normal levels totaling 5.28 billion cubic feet per day operating capacity and 6 plants are capable to restart totaling 2.65 billion cubic feet per day operating capacity once power is restored or upstream gas flow commences. Also see: Hurricane Situation Reports from DOE's Office of Electricity Delivery & Energy Reliability STEO Hurricane Analysis (pdf)