Oil and gas production in the Gulf is starting to come back, however the major problem area is the refineries, many of which are down with flooded and disabled machinery, no power, no roads, and no work force.
Because the last American refinery was built nearly 30 years ago – with only a single new one now in the works – the problem is unlikely to disappear quickly.
As a consequence, even though crude oil prices have fallen back to pre-Katrina levels, prices for gasoline, heating oil, diesel and jet fuel are expected to remain higher than they were before the storm for a much longer period of time.
Currently, four major refineries, owned by Chevron, Exxon Mobil, ConocoPhillips and Murphy Oil, are either flooded or without power, and are likely to be out of commission for several weeks, perhaps months. Together, these refine 880,000 barrels a day, or 5 percent of domestic capacity.
Without refineries, and the infrastructure that supports them, getting production back online doesn’t help much.