U.S. oil production plunged to a 54-year low after Hurricane Ivan slashed through the Gulf of Mexico two weeks ago, sinking rigs, buckling pipelines and triggering underwater mudslides that sheared the legs off platforms.
The Energy Department said Monday that production from onshore and offshore wells in the U.S. dropped to 5 million barrels a day during the week ended Sept. 24, the lowest since April 1950.
The decline spurred a 17 percent surge in oil prices in three weeks. Friday, oil closed above $50 a barrel for the first time, settling at $50.12 on the New York Mercantile Exchange, but Monday it fell 21 cents, to close at $49.91.
"It’s shocking how much oil and natural gas production has been shut," said Joseph Dancy, who manages the LSGI Technology Fund in Duncanville, Texas. "The damage has been much worse than anyone expected. Key points will be offline for quite a while."
Ivan came ashore Sept. 16 near Gulf Shores, Ala. It crimped oil production at a time when prices were rising because of soaring North American and Asian demand and concern about supply disruptions in Iraq, Russia and Nigeria.
The U.S. is the world’s biggest oil consumer, accounting for a fourth of global demand, and the third-biggest producer, behind Russia and Saudi Arabia, according to the International Energy Agency. The gap between its output and needs is growing.
U.S. oil production peaked in November 1970 at 10.044 million barrels a day, according to the government. Output has fallen as reservoirs tapped early in the last century reached exhaustion, and new discoveries failed to make up the difference. In the past decade, production has dropped 24 percent.
Oil production in the Gulf of Mexico, the single largest domestic source, remained 29 percent below normal at the end of last week, at 484,458 barrels, according to the U.S. Minerals Management Service. ChevronTexaco Corp., BP PLC and other producers had to inspect platforms and pipelines battered by 50-foot swells. Natural gas production was down 19 percent, at 2.3 billion cubic feet a day.
The storm forced Valero Energy Corp., ChevronTexaco and other refiners to close or reduce operations at several plants. Gasoline production fell to a 20-month low, spurring a 15 percent surge in gasoline futures, the benchmarks for wholesale prices, since Sept. 10.
Production cuts in the gulf and port closures in Alabama and Louisiana that cut off some imports prompted the government to lend 4.2 million barrels of crude from the Strategic Oil Reserve to four refiners. The loans amounted to a less than 1 percent of the reserves.
Copyright © 2004, Chicago Tribune
