US Energy Infrastructure Vulnerability: Lessons from the Gulf Coast Hurricanes

A new report by Paul Hibbard of the Analysis Group examines the vulnerabilities in our nation’s oil and natural gas infrastructure as revealed by the havoc wreaked by the Gulf Coast hurricanes of 2005.

Hurricanes Katrina and Rita took out virtually all of the Gulf Coast region’s oil and gas production capacity, and much of the region’s processing and refining capacity for a short period of time. To date, oil and gas production in the Gulf of Mexico still has not returned to pre-hurricane levels. On top of historically thin supply margins and high prices, the results were predictably severe. The supply and price impacts that followed revealed or reinforced what we already knew: U.S. oil and gas industries are concentrated geographically, with extraordinarily thin reserve capacity in other parts of the country. U.S. energy supply, energy markets, and by extension economic activity are all heavily dependent on energy supply and infrastructure concentrated in the Gulf region.

The report describes the sources of supply for each fuel, along with the capacity to process raw fuels and distribute the resulting products to U.S. markets. It also examines industry conditions following the hurricanes, and the actual and expected supply and price impacts of these disruptions. Finally, it reviews the supply and price impacts on energy markets in the Northeast, which is excessively dependent on Gulf supplies of oil for heating, and on natural gas for heating, commercial activity, and electricity generation.