More than 90pc of US oil production in the Gulf of Mexico had been shut down as Hurricane Ida made landfall this evening, threatening to push petrol prices even higher.
The Category 4 hurricane risks inflicting severe damage to the region’s oil and gas industry as thousands of residents were forced to evacuate and flights were grounded. Analysts warned that Ida was on the same path as other storms that previously caused huge damage to oil facilities.
Oil prices posted their biggest weekly rally in more than a year as the hurricane barrelled towards the US coast last week, with Brent crude gaining 10pc to hit close to $73 per barrel.
The storm could help provide more upward pressure to petrol prices that are already at an eight-year high. Prices on British forecourts have jumped by 18p a litre in the last eight months as the oil market bounced back, according to the RAC.
Louisiana’s governor, John Bel Edwards, warned over the weekend that Ida will be one of the strongest hurricanes to hit the southern state since the 1850s.
Ida has caused more output cutbacks than Hurricane Katrina with 1.65m barrels per day of crude shut off, according to the US Bureau of Safety and Environmental Enforcement. That is equivalent to 91pc of the US Gulf’s crude production while oil refining capacity of close to 4.4m barrels per day is also in the storm’s path.
“Many plants have been hardened against hurricanes, but disruptions in operations are still very likely due to flooding, power outages and personnel dislocations,” analysts at S&P Global Platts Analytics said.
“Hurricane Ida is expected to come ashore along the same path as other storms which did extensive damage to US Gulf Coast refining and petrochemical facilities.”
The storm intensified as it moved towards the US coast yesterday and was expected to strike the city of New Orleans on the 16th anniversary of the devastating Hurricane Katrina. Category 4 hurricanes have winds reaching at least 130 miles per hour.
As higher energy costs add to building inflationary pressures, top economist Raghuram Rajan sounded the alarm over rising prices in the UK.
The former governor of the Reserve Bank of India told the Mail on Sunday: “Companies haven’t felt comfortable raising their prices for a while, and we have had some transient price increases.
“But those could become persistent if the transition [out of the pandemic] is long enough.”
Mr Rajan, once a contender to replace Mark Carney at the Bank of England, said businesses will hike costs “if there is a fair amount of demand out there and it isn’t quelled by rising prices”.
Inflation fears have been stoked by fast-rising prices across the world as post-lockdown demand booms and supply chain disruptions bite.
Many businesses are battling severe shortages of materials, sending costs for many goods soaring. Top central banks have argued that price pressures will be transitory but markets have moved forward their expectations of interest rates rises to combat inflation.