McCain scales back the Republican convention, and oil prices fall as the damage to the oil industry is less than expected
by The Associated Press
NEW ORLEANS - A weakened Hurricane Gustav slammed into the heart of Louisiana's fishing and oil industry with 110 mph winds on Sept. 1, delivering only a glancing blow to New Orleans that raised hopes the city would escape the kind of catastrophic flooding brought by Katrina three years ago. Oil prices tumbled to below $111 a barrel on expectations that Gustav's impact on the Gulf of Mexico's energy infrastructure would be less than some had feared. Republicans, meanwhile, hurried to turn the opening day of their national convention into a fundraising drive for hurricane victims, with Presidential candidate John McCain visiting a disaster relief center in Ohio.
Wind-driven water sloshed over the top of the Industrial Canal's floodwall, but city officials and the Army Corps of Engineers said they expected the levees, still only partially rebuilt after Katrina, would hold. The canal broke with disastrous effect during Katrina, submerging St. Bernard Parish and the Lower Ninth Ward. "We are seeing some overtopping waves," said Colonel Jeff Bedey, commander of the Corps' hurricane protection office. "We are cautiously optimistic and confident that we won't see catastrophic wall failure."
Of more immediate concern to authorities was a barge that broke loose from its moorings and crashed into two anchored, scrapped ships. There were no immediate reports of any damage to the canal. Only one storm-related death, involving a woman killed in a car wreck, was reported in Louisiana.
U.S. Trading Closed for Labor Day
The National Hurricane Center in Miami said Gustav hit around 11:30 a.m. near the Cocodrie (pronounced ko-ko-DREE), a low-lying community in Louisiana's Cajun country 72 miles southwest of New Orleans, as a Category 2 storm on a scale of 1 to 5. Forecasters had feared the storm would arrive as a devastating Category 4.
Oil prices had risen by nearly $3 to over $118 a barrel earlier in Monday's session. A stronger dollar was a factor in helping to reverse that. By late afternoon in Europe, light, sweet crude for October delivery was down $4.70 to $110.76 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it had reached a high of $118.25 before retreating. U.S. trading was closed for Labor Day.
"There's no question the drilling platforms in the Gulf of Mexico and the big refineries between Houston and New Orleans are in the path of this hurricane," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "There's likely to be some damage. We could see an extended period of disruption." Some analysts, however, said the market's response to Gustav was not as strong as some predicted. U.S. energy risk management firm Cameron Hanover described the market's reaction as "extremely subdued."
GOP Watching the Storm
Current crude supplies in the U.S. were "ample due to higher imports from the North Sea," said analysts at JBC Energy in Vienna, Austria, another possible reason for the lack of a rally in oil prices.
Oil companies were shutting down productions and evacuating facilities ahead of the storm. Exxon Mobil (XOM), Royal Dutch Shell (RDSA), and Valero Energy (VLO), North America's largest refiner, were among the companies that said they had shut down Gulf Coast refineries, primarily in south Louisiana. Altogether, about 2.4 million barrels of refining capacity had been halted, roughly 15% of the nation's total, according to figures from Platts, the energy information arm of The McGraw-Hill Companies (MHP), which also owns BusinessWeek. The U.S. Gulf Coast is home to nearly half the nation's refining capacity.
In 2005, Katrina and Hurricane Rita destroyed 109 oil platforms and five drilling rigs.
In St. Paul, Republican Party officials kept a watchful eye on the storm, as they tried to decide next steps for their shortened convention. McCain's wife and First Lady Laura Bush appealed for Gulf Coast help. Party officials said they still expected McCain to address the convention at Thursday night's finale.
Obama Changes Plans
Democrats also swung their attention to the hurricane. Presidential nominee Barack Obama altered his campaign schedule to return to his Chicago headquarters to monitor the storm's progress. His 16 campaign offices in North Carolina solicited nonperishable goods for Gustav's victims. Other state campaign organizations may do the same, Obama aides said.
Obama has said he may visit storm-damaged areas once things have "settled down."
President George W. Bush, whose Administration was widely accused of a botched handling of the Katrina disaster three years ago, traveled to Texas rather than to St. Paul, where he had been scheduled to speak on the opening night of the convention. Bush planned visits to Austin and San Antonio to visit staging grounds for hurricane response efforts. There was no word on whether he would address the convention at some point by satellite.