Hurricane Update: Infrastructure Resiliency Aids Recovery

on September 13, 2017 at 10:00 AM

With the impacts of Hurricane Irma still to be seen, today’s energy infrastructure network, innovations, technology and knowledge appear to have gained from past big-weather events allow some cautious optimism. That’s the conclusion of a pair of energy experts who briefed reporters during a conference call designed to provide context to the efforts of industry and communities to meet the challenges of a major storm.

Guy Caruso, senior energy and national security adviser at the Center for Strategic and International Studies and former EIA Administrator from 2002-2008, and Robert McNally, a fellow at the Columbia University’s Center on Global Energy Policy and former international and domestic energy adviser in the Bush administration, talked to reporters about the early indications from Harvey. Irma poses its own set of challenges, yet McNally said every effort will be made to limit the impacts on energy supplies:

“The history and what we’re seeing right now shows that the oil industry and the government – the federal government and the state government – is going to move heaven and earth to make sure that the energy disruptions are as short as possible.”

Preparation helps. Industry, state and federal officials have worked to help ensure supply inventories are in place to help address disruptions. The experience of Harvey suggests these and other efforts to bring systems back online will pay off.

Caruso observed that all industry segments – upstream, midstream and downstream, including refining – were affected by Harvey. There were refinery and pipeline shut downs, yet these pieces of infrastructure are coming back, he said. Government has played a role by temporarily waiving certain restrictions and regulations and granting crude oil exchanges from the Strategic Petroleum Reserve, he said. Ultimately, an important factor is the role of the marketplace itself. Caruso:

“There’s an overarching point that I can make based on my experience … [in the past] price controls, rigid allocations – those, in my view and in many studies that have been done about disruptions, were part of the problem as opposed to part of the solution. Today we have open markets, less restrictions on the movement of crude and products, and I think that has shown itself to be an effective allocator supply, even during Katrina [in 2005] and now even more so during Harvey.”

McNally said that the market has responded to Harvey, as demonstrated by the global wholesale prices. Before Harvey gasoline futures were trading at $1.68 per gallon wholesale, rose to $2.15 soon after the storm and now have been at $1.66, below where they were before the hurricane. That’s not a predictor for the future, but an indication of the way markets work and allocate where there’s need.

To this point – and again, Irma will pose new challenges – the experiences of the past few weeks underscore what McNally said he has learned in writing about the history of the oil industry:

“If you look at the oil industry (compared to its dawn), I think what will strike you is how resilient it is, how innovative it is, how it rises to the occasion, how it absorbs blows and challenges and comes back faster often than most expect. It’s really remarkable.”

API President and CEO Jack Gerard opened the conference with some words for communities that have been in one hurricane’s path, as well as those who’re in another’s path:

“Our thoughts and prayers are with those who are recovering, not only from Harvey in Texas and southern Louisiana, but also to those who are now facing the impacts of Irma and potentially [Hurricane] Jose. …We’re inspired by the way communities have come together in the affected areas to help one another out – a true American spirit.”

By Mark Green 

Originally posted September 8, 2017

Energy Tomorrow is brought to you by the American Petroleum Institute (API), which is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry.