	Overview

Hurricanes Katrina and Rita shut down oil and gas production from the Outer ContinentalShelf in the Gulf of Mexico, the source for 25% of U.S. crude oil production and 20% of natural gasoutput. Katrina, which made landfall on August 29, resulted in the shutdown of most crude oil andnatural gas production in the Gulf of Mexico, as well as a great deal of refining capacity in Louisianaand Alabama. Offshore oil and gas production was resuming when Hurricane Rita made landfall onSeptember 24, and an additional 4.8 million barrels per day (mbd) of refining capacity in Texas andnearby Louisiana was closed. Refined product supplies were initially made up from the release of 30 million barrels ofgasoline, middle distillate and other products from the strategic reserves of member nations of theOrganization for Economic Cooperation and Development (OECD) who are International EnergyAgency (IEA) members. Supply appears to havematched demand, as prices fell through late 2005 and early 2006. As of October, nearly 10% of totalnationwide consumption was shut-in because of production problems in the Federal Offshore Gulfof Mexico, or because of damage to critical infrastructure. Another 3% of nationwide supply fromLouisiana state lands is shut-in. Hurricane Effects on Crude Oil Production, Imports, and Transportation

Nearly 1.6 mbd of crude oil -- the equivalent of 7.6% of U.S. oil consumption -- wasproduced on the Gulf of Mexico Federal Offshore before the hurricanes struck. They havea combined capacity of 554,000 bd (3) . (7) On September 2, as part of the 60 million barrel crude and productstock drawdown coordinated by the International Energy Agency (IEA), the United States offered30 million barrels of SPR crude for sale. In effect, this amount reduced the nation's totalcurrent gas supply by about 10%. Natural gas production from Louisiana state lands was also interrupted by the hurricanes.
Hurricanes Katrina and Rita shut down oil and gas production from the Outer ContinentalShelf in the Gulf of Mexico, the source for 25% of U.S. crude oil production and 20% of natural gasoutput. Katrina, which made landfall on August 29, resulted in the shutdown of most crude oil andnatural gas production in the Gulf of Mexico, as well as a great deal of refining capacity in Louisianaand Alabama, 554,000 barrels per day of which was still closed as of late October, 2005. Offshoreoil and gas production was resuming when Hurricane Rita made landfall on September 24, and anadditional 4.8 million barrels per day (mbd) of refining capacity in Texas and nearby Louisiana wasclosed.
Combining the effects of both storms, 1.3 mbd of refining -- about 8% of national capability-- is shut down, reducing the supply of domestically refined fuels commensurately. Much of therefined product shortfall was made up by imports of refined products, some of which were madeavailable by strategic supplies released by International Energy Agency (IEA) member nations onSeptember 2.
As part of the IEA drawdown, 30 million barrels of crude oil were made available from theU.S. Strategic Petroleum Reserve (SPR), which holds only crude. Only 11 million barrels was soldfrom the SPR, in part because limited refinery capacity reduced the call on crude.
Natural gas production from Gulf of Mexico and Louisiana state lands has been recoveringsince the storms, but the equivalent of about 3% of U.S. consumption remains shut-in because ofproduction or transport problems. Unlike refined products, which can be imported, there is littleextra available supply. A normal storage situation at the start of the heating season -- coupled witha very warm winter -- saw Spring 2006 arrive with surplus gas in storage and gas prices well belowequivalent oil prices.
This report will be updated to reflect significant restoration of gas and oil production andrelated infrastructure, as well as relevant changes in hydrocarbon supply and demand.