Why Refine in Hurricane Zones?
Posted September 19, 2008 at 4:29 pm 
Filed in: An article in today’s New York Times notes that crude oil prices are rising as Gulf Coast refineries remain shut down in the wake of Hurricane Ike. That raises the obvious question: why do we build so much critical energy infrastructure in the middle of a hurricane zone?
The simple fact is that 60 percent of the crude oil produced in the continental United States is produced in Texas, Louisiana, Mississippi or the Gulf of Mexico. The distribution infrastructure is designed to distribute crude oil and finished products that are produced, refined or imported into the Gulf Coast states, as can be seen in the map below, prepared by the Attorney General of Washington State. Setting aside the difficulties in building new refining capacity in the current market, adding capacity away from the Gulf Coast could require significant additions to the pipeline infrastructure which cannot be easily justified.
.jpg "WA MAP")
In fact, it seems likely much of the refining capacity that is down in the Gulf is down because power has not been fully restored, and that refineries will be operating at their pre-storm capacity in the near future.
If the Atlantic OCS is opened to oil production, we might see the development of some pipeline and refinery infrastructure on the Atlantic Coast that could counterbalance the risk of concentrating so much infrastructure in the Gulf. However, in the absence of new production in the Atlantic, it is unlikely to ever be cost effective to build significant new infrastructure away from the Gulf just to reduce the risk posed by hurricanes. In other words, this risk may just be one that we have to live with unless we initiate production elsewhere or until we begin relying on some other means (e.g., electricity) to power our transportation system.
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